NEW YORK: Stock markets around the world mostly fell yesterday as oil prices showed no sign of breaking their prolonged downward spiral, prompting further losses in beleaguered energy shares.
Losses were broad in the US equity market, with eight of the 10 primary S&P 500 sectors down. Energy was by far the weakest group, off 2.7 percent. The sector is now down more than 25 percent from a high reached in July.
The Dow Jones Industrial Average shed 0.52 percent to stand at 17,645.53 points in midday trading. The broad-based S&P 500 dropped 0.62 percent to 2,032.21, while the tech-rich Nasdaq Composite Index fell 0.82 percent to 4,665.27.
Eurozone equities were, however, buoyed by persistent hopes of quantitative easing (QE) stimulus from the European Central Bank, dealers said. Frankfurt’s DAX 30 percent climbed 1.38 percent to close at 9,781.9 points and the CAC 40 in Paris gained 1.18 percent to 4,228.24. Milan rose 0.95 percent and Madrid added 0.81 percent. London’s benchmark FTSE 100 index ended the day essentially flat at 6,502.14 points, as energy company shares were punished by the oil prices.
Market expectations are growing that ECB chief Mario Draghi could decide to implement QE, or bond-buying, in order to combat deflation in the 19-nation eurozone. “Some form of quantitative easing (QE) is clearly on the table,” noted economist Neil MacKinnon at Russian financial services group VTB Capital.
Draghi had stated earlier this month that the ECB could launch a QE programme of purchasing government bonds to protect the eurozone from deflation. Some analysts believe the ECB now has little choice to do so at its next meeting on January 22, as data showed last week that eurozone consumer prices sank 0.2 percent last month, in the first fall in five years.
Deflation is defined as an extended period of falling prices where consumers begin to put off purchases in expectation they will fall further, sparking a damaging cycle of falling production, employment and prices.
Elsewhere, most Asian stock markets also retreated after a sell-off in New York at the end of last week in response to data showing weak US wage growth. The news on wages, which overshadowed another forecast-beating rise in job creation, pushed the dollar down against the euro because it complicates the Federal Reserve’s plans to raise interest rates.
Meanwhile, London investors digested news of an impressive takeover in the drugs sector. British drugmaker Shire revealed that it has agreed to buy US rival NPS Pharmaceuticals for $5.2bn. The deal, which has been agreed by the management of both companies, comes two months after the collapse of US drugs giant AbbVie’s $54bn takeover of Shire.
In foreign exchange, the euro declined to $1.1828, from $1.1842 late on Friday in New York. On the London Bullion Market, gold rose to $1,226.50 an ounce from $1,217.75 on Friday.
Agencies
