US stocks have sold off sharply as a brief rally in beaten-down oil prices stalled after US data added to concerns about an oversupplied energy market.
Major US stock indexes were off at least two per cent on Wednesday, with the Nasdaq down more than three per cent. The pan-European FTSEurofirst 300 index closed up 0.4 per cent, well off its highs.
Benchmark Brent crude slipped below $US30 a barrel, a day after US oil prices breached that level.
Volatility in oil prices overshadowed better-than-feared trade data out of China that initially lifted sentiment in equities and commodities.
Benchmark 10-year US Treasury note yields fell to their lowest levels since late October as investors piled into safe-haven government debt.
The deepening slide in oil prices and concerns about China’s economy have rattled equity markets, which have failed to sustain any significant rallies in early 2016.
“There is a fear that the global economy and the US economy as well could lapse into a recession given the fall in energy prices and greater economic weakness overseas,” said Tim Ghriskey, the chief investment officer of Solaris Asset Management in New York.
The Dow Jones industrial average fell 338.85 points, or 2.05 per cent, at 16,177.37, the S&P 500 was down 45.81 points, or 2.36 per cent, at 1,892.87 and the Nasdaq Composite lost 152.86 points, or 3.26 per cent, at 4,533.06.
Investors, who have been hoping stocks were primed to bounce because of the market’s oversold conditions, are looking for confidence from the fourth-quarter earnings season, which begins this week.
Though undercut by the reversal in oil prices, European shares were helped by a rise in Dutch insurer Aegon following a business update.
MSCI’s broadest gauge of stocks globally fell 0.8 per cent.
Concern about a supply glut has helped drag down oil prices to about 12-year lows.
US crude prices settled up 0.1 per cent at $US30.48 a barrel, paring earlier gains. Benchmark Brent settled down 1.8 per cent at $US30.31 a barrel, after falling to $US29.96.
Data showing crude inventories rose 234,000 barrels last week, much less than expectations, was overshadowed by reported builds of 8.4 million barrels in gasoline and more than six million in distillates, which includes diesel and heating oil.
“Overall, it’s a bearish report. I think today’s inventory report is all about products … The long-awaited massive decline in crude production is not starting again,” said Dominic Chirichella, a senior partner at Energy Management Institute in New York.
Investors had seen some encouraging signs in data out of China. Exports from the country fell 1.4 per cent from a year earlier, data from the General Administration of Customs showed. That was better than a Reuters poll forecast an eight per cent drop and moderated from November’s 6.8 per cent decline.
Benchmark 10-year US Treasury notes rose 11/32 in price to yield 2.0629 per cent, from 2.1 per cent late on Tuesday.
The US dollar edged down 0.05 per cent against a basket of currencies, set to break a three-day winning streak. The euro rose 0.2 per cent against the dollar.
Spot gold was up 0.7 per cent, after three sessions of declines.
