US stock markets fell once more Monday as a renewed slump in oil prices, anxiety over global economic growth and central bank policies all but wiped out last week’s brief recovery.
The Dow Jones Industrial Average lost more than 200 points, or 1.3%, and the S&P 500 and tech-heavy Nasdaq both fell over 1.5%. European markets had already finished the day down: in London the FTSE 100 closed down 23.01 points, or 0.39%, Germany’s DAX dropped 0.29% and France’s Cac fell 0.58%.
The declines followed a two-day rally on Wall Street late last week and came as crude oil prices fell as much as 5% following an announcement from Iraq about record-high oil production that will feed into an already oversupplied market, wiping out much of the oil price gains from of the biggest-ever daily rallies on Friday.
“Right now, you could track the direction of stocks when you see where oil is trading,” said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.
The oil-led market turbulence since the start of 2016 has raised hopes of more stimulus from major global central banks.
Last week, European Central Bank chief Mario Draghi signalled the bank was open to more monetary stimulus to combat weak growth and inflation in the euro zone.
Traders have bet the Federal Reserve would seek to soothe financial markets after its two-day meeting on US monetary policy that will begin on Tuesday.
Global markets slumped at the start of the year on fears that a slowdown in world second largest economy China would spread to the rest of the world, and oil prices sank to 13-year lows.
German business confidence deteriorated to an 11-month low in January, a survey showed, suggesting growing concern among company executives in Europe’s largest economy.
“If the Fed puts too much emphasis on global developments, that could really harm sentiment,” Jacobsen said.
US interest rate futures implied traders placed a 13% chance the Fed will hike rates later this week.
The pan-European FTSEurofirst 300 index finished down 0.4%, while Tokyo’s Nikkei ended 0.9% higher.
The MSCI all-country World Equity Index fell 0.4% to 366.48.
Losses in oil and Wall Street pushed the greenback lower. The dollar index, which tracks the dollar against a basket of six currencies, slipped 0.2%, to 99.363.
The yen edged up 0.25% against the dollar at 118.46 yen, and was steady against the euro at 128.40 yen.
Brent crude oil futures were down 5.2% to $30.50 a barrel, while US crude dropped 5.8% to $30.34.
Iraq’s oil ministry told Reuters on Monday that oil output reached a record high in December, putting oil prices under renewed pressure.
US 10-year Treasury yields were down 3 basis points at 2.02%, and 10-year German Bund yield was down 1 basis point at 0.397%, as the fall in oil prices underpinned support for safe-haven debt.