Scoreboard: Slippery oil

European markets slumped as falling oil prices hit energy shares and fuelled fears of deflation, while Wall Street retreated on global growth concerns.

In US economic data, industrial production rose by 1.3 per cent in November after advancing by 0.1 per cent in October -- marking the largest rise since May 2010. Capacity utilisation rose from 79.3 to 80.1 -- the highest reading since March. The New York Fed Empire State index fell from 10.16 to -3.58 in December -- the first negative result in almost a year. US NAHB Housing Market Index eased from 58 to 57 in December -- highlighting that home builder sentiment remained relatively optimistic. 

European shares tumbled on Monday, resuming last week’s sharp sell-off. The drop in oil prices hurt energy shares and fuelled fears of deflation in the euro zone. The STOXX Basic Resources Index fell by 2.9 per cent. The FTSEurofirst 300 index fell by 2.4 per cent, the German Dax fell by 2.7 per cent, while the UK FTSE fell by 1.9 per cent. In London trade shares in BHP Billiton lost 3.7 per cent while Rio Tinto gave back 2.5 per cent.

US sharemarkets fell on Monday as concerns about global growth hurt sentiment. Despite the fall in oil prices, the S&P energy sector outperformed falling by just 0.2 per cent. The S&P utilities (down 1.2 per cent) and financial (down 0.8 per cent) sectors were amongst the worst performers. At the close of trade left, the Dow Jones was down by 100 points or 0.6 per cent. The S&P 500 index was down by 0.6 per cent and the Nasdaq lost 48 points or 1 per cent.

US treasuries fell on Monday (yields higher) ahead of the US FOMC meeting in coming days. US two-year yields rose by 4 points to 0.588 per cent while US 10-year yields rose by 3 pts to 2.115 per cent.

Major currencies were mostly weaker against the greenback in European and US trade on Monday. The Euro fell from highs near $US1.2475 to lows near $US1.2420, and was around $US1.2435 in late US trade. The Aussie dollar fell from highs near US82.65c to around US82.00c and traded near US82.20c in late trade. And the Japanese yen traded between 118.95 yen per US dollar to ¥117.55 and was near ¥117.70 in late US trade.

World oil prices fell to fresh 5-year lows, after OPEC said it would not cut oil output despite fears of excess supply. The UAE oil minister rejected calls for another OPEC emergency meeting. Brent crude fell by US93c or 1.5 per cent to $US60.92 a barrel while the US Nymex crude price fell by $US1.90 or 3.3 per cent to $US55.91 a barrel.

Base metal prices were mostly weaker on the London Metal Exchange on Monday with the exception of Tin (unchanged). Copper and nickel both lost 1.4 per cent while lead gave back 1.5 per cent. Gold fell with Comex gold futures down by $US14.80 an ounce or 1.2 per cent to $US1,207.70 per ounce. Iron ore fell by US10c to $US68.60 a tonne on Monday.

Ahead: In Australia, Reserve Bank Board minutes are released alongside weekly consumer confidence figures. In the US, housing starts and building permits are released.

Savanth Sebastian is an economist with Commsec.

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