Brent crude drops to 11-year low but ‘Wall Street’ stocks rebound

European, Asian shares fall; gold up on softer dollar

NEW YORK, Dec 21, (Agencies): A persisting world oil glut dragged Brent crude prices down on Monday to their weakest in more than 11 years and crude to six-year lows, but Wall Street gained broadly after big declines a week earlier.

The dollar fell against the euro and yen as data from the Chicago Federal Reserve suggested the economy grew at a below-average pace in November, before the Federal Reserve raised interest rates last week.

Wall Street started the abbreviated Christmas holiday week on a positive note, led by tech and financials, and even the S&P 500 energy sector rose despite oil’s tumble.

Equity markets in Europe and Asia were largely higher. The MSCI all-world stock index was up 0.3 percent, erasing some of its Friday losses.

“There looks to be like a little relief bounce this morning as we move into the last two weeks of the year,” said Andre Bakhos, managing director at Janlyn Capital LLC in Bernardsville, New Jersey. “It’s a fickle market.”

The Dow Jones industrial average was up 119.46 points, or 0.7 percent, to 17,248.01, while the S&P 500 gained 15.29 points, or 0.76 percent, to 2,020.84 and the Nasdaq Composite was 40.49 points, or 0.82 percent higher at 4,963.57.

The Dow ended Friday down 2.1 percent, while the S&P 500 lost 1.78 percent and the Nasdaq 1.59 percent. All three fell on the week.

Brent futures recovered some ground and was down nearly 1.8 percent at $36.22 after falling as much as 2.3 percent to $36.04 a barrel earlier, the contract’s lowest level since July 2, 2004. crude fell to $33.98, its lowest level since Feb 13 2009.

While Europe’s index of major companies rose slightly, Spain’s Ibex share index fell 2.2 percent and was on track for its worst day in almost three months after a fragmented national election.

In Spain, Prime Minister Mariano Rajoy’s conservative Popular Party won more seats than any other party but fell well short of a majority. Left-wing parties also failed to win a clear mandate to govern, and talks to form a coalition government could drag on for weeks.

Germany’s DAX rose 0.6 percent, Britain’s FTSE 100 gained 0.9 percent and France’s CAC40 index was up 0.5 percent.

Treasury yields were little changed on Monday on hesitation to make major bets in thin year-end trading conditions, while little focus on the Federal Reserve’s next rate hike also kept trading activity muted.

Benchmark 10-year Treasury notes were last mostly flat in price to yield 2.195 percent, from a yield of 2.197 percent late Friday. 30-year Treasury bonds were last down 2/32 in price to yield 2.911 percent, from a yield of 2.908 percent late Friday.

In currencies, the dollar fell 0.27 percent against a basket of major currencies, and the euro =EUR rose 0.4 percent against the dollar.

US

Financial stocks led a cheerful start to the Christmas holiday week for the stock markets, rebounding from two days of losses, with investors taking in stride a slide in crude prices.

Trading volumes are expected to be relatively light this week, with stock markets operating a shortened session on Thursday and closing on Friday for Christmas.

US stock indexes slumped on Thursday and Friday as weak crude prices dampened the optimism sparked by the first Federal Reserve interest rate hike in nearly a decade.

Oil prices have been sliding under continued pressure from global oversupply and tepid demand.

“It’s going to be interesting to see if this market can hold up and divorce itself, at least for today, from the price of oil,” said Peter Cardillo, chief market economist at First Standard Financial in New York.

“We’re probably going to stay in the trading range, with an upward bias.”

At 11:03 am ET (1603 GMT), the Dow Jones industrial average was up 85.25 points, or 0.5 percent, at 17,213.8, the S&P 500 was up 12.3 points, or 0.61 percent, at 2,017.85 and the Nasdaq Composite index was up 33.26 points, or 0.68 percent, at 4,956.35.

Although the S&P 500 touched record highs in 2015, the index is down 2.6 percent for the year, buffeted by slowing growth in China, slump in commodities and uncertainty over interest rates. The Dow Jones industrial average is down 3.9 percent.

The Nasdaq Composite, which briefly breached its dotcom highs this year, is the only one of the three major indexes in the black, having risen 3.9 percent so far in 2015.

All 10 major S&P sectors were higher, led by a 0.83 percent rise in the financial sector. JPMorgan’s shares were up 1.5 percent and provided the biggest boost.

Goldman Sachs was up 1.1 percent and gave the biggest push to the Dow.

Microsoft was up 0.9 percent at $54.98 - providing the biggest boost to the S&P and Nasdaq - after a Barron’s report on Sunday that the company’s shares could rise 30 percent over the next 18 months.

Disney was down 1.6 percent at $106.02, wiping out earlier gains from the latest Star Wars instalment’s box office-breaking opening weekend.

Europe

European shares fell on Monday, giving up their earlier gains as losses in Spain and a rise in the euro weighed on the region’s stock markets.

The pan-European FTSEurofirst 300 index ended down 1.2 percent, while the euro zone’s blue-chip Euro STOXX 50 also declined by 1.5 percent.

Britain’s FTSE 100 fell 0.3 percent and Germany’s DAX retreated 1 percent.

Spain’s IBEX equity index was the worst performer, falling 3.6 percent after an inconclusive Spanish election result, while Spanish 10-year government bond yields also hit one-month highs after the election.

Shares in Spanish banks fell sharply, with Caixabank dropping 7.4 percent while Santander shed 4.9 percent.

Neither Prime Minister Mariano Rajoy’s conservatives nor left-wing parties won a clear mandate to govern in Sunday’s poll, casting further uncertainty over the outlook for Spain’s reform programme and broader economy. Talks on forming a coalition government are expected to take weeks.

“The Spanish election has added to some year-end nervousness among investors,” said Caroline Vincent, European equities fund manager at Cavendish Asset Management.

A rise in the euro against the dollar also weighed on European shares, since a stronger euro can make it harder for European companies to export goods overseas.

The dollar fell against the euro after data from the Chicago Federal Reserve suggested the economy grew at a below average pace in November before the Federal Reserve raised interest rates last week.

Some fund managers remained relatively upbeat on the prospects for European shares next year, in spite of political uncertainty in countries such as Spain and Greece.

Asia

Oil prices extended losses Monday with Brent hitting an 11-year low, fuelling fears about the global economy, but most Asian stock markets recovered from early losses to rally in the afternoon.

However, with Wednesday’s US Federal Reserve interest rate rise now in the past, analysts said concerns about the global economy continue to keep traders cautious.

While markets will begin winding down for the Christmas break Friday there are some key economic figures due for release this week, including US economic growth and home sales as well as Japanese inflation and spending.

Crude continued to slide as an ongoing supply glut showed no sign of easing. Figures Friday showed a rise in the number of US rigs drilling, increasing worries that output will continue apace.

Brent sank 2.1 percent at one point to $36.09 a barrel — its weakest since July 2004 — and US standard West Texas Intermediate was down 1.2 percent at $34.32, levels not seen since early 2009 at the height of the global financial crisis.

Prices have slumped by almost a fifth since December 4 when the OPEC oil producers’ group decided against limiting production, despite tepid demand and the supply glut.

The commodity has sunk more than 60 percent from above $100 in summer 2014 and prices are now at levels not seen since the financial crisis.

“There hasn’t been any significant signs of a pick-up in demand and we haven’t seen any meaningful cuts to production,” Ric Spooner, a chief analyst at CMC Markets in Sydney, told Bloomberg News.

“Nothing has really changed in the oil market over the past couple of months apart from the price.”

On currency markets the greenback edged up to 121.40 yen Monday — also bouncing from early selling — but remains well below last week’s high above 123 yen touched after the US rate rise. The dollar was slightly up against the euro.

In Tokyo scandal-hit conglomerate Toshiba lost almost 10 percent following a weekend report in the leading Nikkei business daily that it would likely record a fiscal year net loss of about $4 billion.

In a statement after the markets closed Monday, Toshiba said it would post a record 550 billion yen ($4.5 billion) annual loss.

The 140-year-old company was this year hit by revelations that executives systematically pressured underlings to inflate profits in a years-long scheme to hide poor results.

Oil

European benchmark Brent crude slumped to an 11-year low on Monday as oil prices resumed their slide in an oversupplied global market.

Brent North Sea crude hit $36.05 a barrel, the lowest level since July 2004.

West Texas Intermediate (WTI) dropped to $34.12 a barrel — the lowest since February 2009.

Crude prices continued to slide as an ongoing supply glut showed no sign of easing. Figures released Friday showed a rise in the number of US rigs drilling, increasing worries that output will continue apace.

This added to “the already prevailing negative sentiments in the market due to the build-up in inventory”, said Sanjeev Gupta, head of the Asia-Pacific Oil and gas practice at professional services organisation EY.

Gupta added that the lifting of the US export bans could negatively impact “long-term futures prices”.

US lawmakers last week lifted a 40year ban on oil exports, a historic shift, even though analysts say the world supply glut is still the main driver of prices in the short term.

Gold

Gold rose almost 1 percent on Monday as weaker than expected data and uncertainty about how fast the Federal Reserve will tighten interest rates next year weighed on the dollar.

A renewed slump in crude oil to its lowest levels since 2004 was seen as curbing gold’s ascent in the near term. The metal is usually seen as a hedge against oil-led inflation.

Spot gold rose 0.9 percent to $1,075.36 an ounce by 1428 GMT, following a 1.4 percent gain on Friday.

Liquidity is expected to drop as trading enters the last two weeks of the year.

The metal saw bids on Monday as the dollar fell after data from the Chicago Federal Reserve suggested that the economy grew at a below average pace in November before the central bank raised interest rates last week.