Falling oil prices send European markets lower

European shares fell on Tuesday, led by energy companies as Brent oil fell to a fresh five-and-a-half-year low on persistent worries about a global supply glut.

The STOXX Europe 600 oil & gas index fell 1.6 per cent earlier, taking its loss for the year to 15 per cent following a slump in oil prices since June, caused by ample supply at a time of still subdued global demand.

Explorers Seadrill and Tullow Oil were down around 3 per cent.

Brent oil fell to under $57 per barrel as persistent worries about a global supply glut offset concerns about output disruptions in Libya. Forecasts for a 900,000-barrel draw in oil stocks last week in top consumer the United States checked further losses. “There’s no sign of any reduction of output by OPEC,” said Ken Hasegawa, commodity sales manager at Tokyo’s Newedge Japan. He said Brent could drop to $55 a barrel and US crude to $50 a barrel early next year.

Risk appetite was also hit by uncertainty surrounding Greece, which is heading to a January election that the leftist anti-bailout Syriza party is tipped to win. Greek shares were flat after falling nearly 4 per cent on Monday, when the parliament in Athens failed to elect a head of state, triggering the early vote.

The FTSEurofirst 300 index of pan-European shares was down 0.5 per cent at 1,370.76 points earlier, leaving it up 4 per cent for the year in the last full trading day of 2014.

“Given the fact that we had such an aggressive run up, certainty in the week before Christmas, people are quite happy to take stuff off the table,” Giles Watts, head of equities at City Index, said.

Asian shares also fell as a stronger dollar fueled a further selloff in commodities. Japanese markets will be shut from Wednesday to Friday, reopening next Monday.

MSCI’s broadest index of Asia-Pacific shares outside Japan was down about 0.8 percent on the day, and off less than 1 percent for the year. Japan’s Nikkei stock average shed 1.6 per cent on its final day of 2014 trading, but still gained 7.1 per cent this year. With reflationary policies of the Bank of Japan and prime minister Shinzo Abe set to continue in 2015, many investors maintained a bullish outlook. “The new year will be very positive, with stocks boosted by likely additional easing by the BOJ and corporate earnings growth,” predicted Takashi Hiroki, chief strategist at Monex.

On Wall Street, the Dow Jones industrial average ended slightly lower, while the S&P 500 and the Nasdaq Composite managed to eke out modest gains despite concerns about Greece’s political woes.

Reuters