Business International

Oil plunges, Wall Street drops, China woes deepen

Image: Investors play cards in front of an electronic board showing stock information at a brokerage house in Beijing, China, January 4, 2016. REUTERS/Li Sanxian


By Lewis Krauskopf

NEW YORK (Reuters) – Wall Street and European stock markets fell on Monday, worsening a brutal start to 2016, as a plunge in beaten-down oil prices and a fresh tumble for Chinese shares gave investors more reasons to sell.

After rising in morning trading, the major U.S. indexes reversed course and were set for another down day after the S&P 500 and the Dow last week posted their worst five-day start to the year in history.

The pan-European FTSEurofirst 300 index also gave up initial gains and ended down 0.4 percent.

Fears over China’s economy contributed to last week’s declines, and China’s main stock indexes each dropped more than 5 percent on Monday. Oil prices fell to new 12-year lows, as concerns over China hurt commodity prices broadly.

“The market has been looking for reasons to be negative and China and oil are two of the most convenient reasons today,” said Michael Holland, chairman of investment company Holland & Co in New York. “That’s what happens in market cycles … right now we people simply have searching for reasons to be negative.”

The Dow Jones industrial average was down 20.61 points, or 0.13 percent, at 16,325.84, the S&P 500 lost 7.92 points, or 0.41 percent, at 1,914.11 and the Nasdaq Composite fell 31.13 points, or 0.67 percent, at 4,612.50.

Energy shares led declines, while the healthcare sector fell 2 percent, as Celgene Corp weighed after posting disappointing financial outlook.

Investors were looking to U.S. corporate earnings to help provide confidence, with Alcoa posting results later on Monday and major banks reporting later this week, despite expectations for a second consecutive quarter of overall declining earnings.

“The mentality has been pretty negative and I don’t see that changing this morning or today until there is more meat on the bones from a data standpoint,” said Michael James, managing director of equity trading at Wedbush Securities in Los Angeles.

MSCI’s broadest gauge of stocks globally slipped 0.7 percent, after registering its biggest weekly decline in more than four years.

Oil prices declined for a sixth straight session to start the new year, as traders cited fears over slowing demand in China.

U.S. crude prices settled down 5.3 percent to $31.41 a barrel, while benchmark Brent dropped 6 percent to $31.55 a barrel.

“The focus is still on China and the demand concerns in China moving forward into 2016,” said Tony Headrick, an energy market analyst at CHS Hedging LLC.

Still, U.S. Treasury yields inched higher as concerns over global growth eased, leading traders to sell some safe-haven U.S. government debt.

Benchmark 10-year notes were down 8/32 in price to yield 2.1595 percent, from 2.131 percent late on Friday.

“Last week, Treasuries rallied because Chinese stocks fell and today Chinese stocks fell, but we didn’t rally, suggesting the panic from last week seems to have subsided,” said Ian Lyngen, senior government bond strategist at CRT Capital in Stamford, Connecticut.

The U.S. dollar was up 0.2 percent against a basket of currencies, while the euro fell 0.5 percent against the dollar.

Copper prices fell 2.3 percent to 6-1/2-year lows as the Chinese stock declines reinforced worries about demand in the world’s biggest consumer of industrial metals.

Spot gold fell 0.7 percent but still hovered at more than two-month highs.

The 19-market Thomson Reuters CoreCommodity Index sank 2.7 percent to a 13-1/2-year low.

(Additional reporting by Gertrude Chavez-Dreyfuss, Catherine Ngai and Tariro Mzezewa in New York, Marc Jones and Amanda Cooper in London; Editing by Bernadette Baum and Nick Zieminski)

Copyright 2015 Thomson Reuters. Click for Restrictions.

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