European shares fell for a third straight session on Wednesday, as the slump in oil prices hurt energy stocks. The STOXX 600 oil and gas sector lost 1.9 per cent and is now down 27 per cent since June. Greek stocks continued to slide after the unexpected decision to bring forward the country's presidential election. The Greek ATG stock index fell 1 per cent after the 12.8 per cent fall in the previous session. The FTSEurofirst 300 index lost 0.4 per cent while the German Dax managed to eke out a 0.1 per cent. The UK FTSE lost 0.5 per cent. In London trade shares in BHP Billiton fell by 1.9 per cent while Rio Tinto eased 1.8 per cent.
US sharemarkets fell sharply on Wednesday with energy stocks leading the declines. Falling oil prices continued to raise concerns about the profitability of oil companies. The S&P energy index was down 3.2 per cent and was the worst performing sector. Exxon Mobil fell 3.3 per cent and was the biggest decliner on the S&P. Shares of Yum Brands fell 5.3 per cent after it lowered its profit forecasts for the second time this year. Transport and technology stocks were amongst the better performers. At the close of trade, the Dow Jones was lower by 268 points or 1.5 per cent. The S&P 500 index fell 1.6 per cent, while the Nasdaq lost 82 points or 1.7 per cent.
US treasuries rose on Wednesday (yields lower) on safety buying. The slide in global equities and oil prices increased the demand for safe haven US debt. US 2-year yields fell 4 points to 0.579 per cent while US 10-year yields fell by 4 points to 2.178 per cent.
Major currencies were mixed against the greenback in European and US trade on Wednesday. The euro lifted from lows near $US1.2365 to around $US1.2445 and was near $US1.2440 in late US trade. The Australian dollar fell from highs near US83.45c to around US82.90c and was around US82.95c in late US trade. And the Japanese yen strengthened from 119.40 yen per US dollar to ¥118.05 and was near ¥118.10 in late US trade.
World oil prices fell sharply to five-year lows on Wednesday as excess supply weighed on prices. The EIA energy report confirmed that US crude stockpiles surged by 8.6 million barrels against expectations of a build of 2.6 million barrels last week. In addition Saudi Arabia's Oil Minister shrugged off suggestions that the kingdom might cut output, sticking to comments that the market will correct itself. The market also came under pressure from OPEC's monthly report which revised down oil demand by 280,000 barrels per day to 28.92 million. Brent crude fell by $US2.46 or 3.7 per cent to $US64.26 a barrel. US Nymex crude price fell by $US2.88 or 4.5 per cent to $US60.94 a barrel, having earlier fallen to a 5½-year low of $US60.43.
Base metal prices were weaker on the London Metal Exchange on Wednesday with zinc (down 2 per cent) and tin (down 1.5 per cent) leading the declines. Other metals lost 0.5 per cent-1.3 per cent. Gold fell on Wednesday as investors locked in profits from the prior session’s gains. The Comex gold futures price was down by $US2.60 an ounce or 0.2 per cent to $US1,229.40 per ounce. Iron ore fell by US50c to $US68.90 a tonne on Wednesday.
Ahead: In Australia employment data is released. In the US, retail sales and business inventories are released
Savanth Sebastian is an economist at CommSec.