Global equities slump, led by energy as oil hits five and a half year lows

By Sam Forgione

NEW YORK (Reuters) – Equity markets worldwide tumbled on Monday, led by commodity-linked shares as oil prices fell to 5-1/2-year lows and investors fled to the safety of government bonds.

Crude oil futures and U.S. crude prices dropped to their lowest levels since spring 2009, hit by a global supply glut and lackluster demand. Strength in the U.S. dollar, which touched a near nine-year high against the euro on the EBS platform, weighed on dollar-denominated commodities.

Data showed Russia’s oil output hit a post-Soviet high last year, while Iraq’s oil ministry said that the country’s oil exports in December were the highest since 1980, underscoring excess supply. Brent crude <LCOc1> for February fell to as low as $ 52.70 per barrel, while U.S. crude <CLc1> dipped below $ 50 to a low of $ 49.95 per barrel. It was lately traded at $ 50.34 a barrel.

The S&P 500 energy sector <.SPNY> was last down 4.3 percent after falling almost 20 percent over the last two quarters of 2014. European oil and gas <.SXEP> and the basic resources <.SXPP> indexes were last down 5 percent and 3.8 percent, respectively.

The decline in U.S. stocks is “driven quite a bit by the slump in energy prices,” said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

“You also have a very strong dollar,” he said. “Multinationals will have their earnings decreased if they aren’t fully hedged.”

Political uncertainty in Greece, which has renewed fears of a possible Greek exit from the euro zone, also rattled European stocks before the country’s elections later this month.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, hit a nine-year high of 91.775. The euro hit a near nine-year low against the dollar of $ 1.18605 on the EBS platform, tumbling on the worries over Greece.

Weaker oil prices and the stronger dollar weighed on emerging markets shares, which hit more than two-week lows. Chinese shares were the exception, reaching a five-year closing high.

The concerns about Greece and Europe’s economy helped push long-dated U.S. government bond yields to their lowest levels since August 2012. The yield on the 30-year U.S. Treasury <US30YT=RR> bond was last at 2.614 percent after touching a low of 2.604 percent.

MSCI’s all-country world index <.MIWD00000PUS> was last down 1.75 percent at 408.64. Europe’s broad FTSEurofirst 300 index <.FTEU3> was down 2.27 percent at 1,332.28.

The Dow Jones industrial average <.DJI> was down 1.42 percent at 17,579.45. The S&P 500 <.SPX> was down 1.5 percent, at 2,027.41. The Nasdaq Composite <.IXIC> was down 1.11 percent, at 4,674.12.

Brent crude <LCOc1> was last down $ 3.50 at $ 52.92 a barrel. U.S. crude <CLc1> was last down $ 2.49 at $ 50.2 per barrel.

The dollar index <.DXY> was up 0.46 percent, to 91.497. Spot gold prices <XAU=> rose $ 7.32 to $ 1,196.20 an ounce.

(Reporting by Sam Forgione; Additional reporting by Rodrigo Campos and Michael Connor in New York and Atul Prakash and Christopher Johnson in London; Editing by Leslie Adler)

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