Wall St falls as energy shares weigh, reversing recent gains

A renewed slump in oil prices amid a lingering global supply glut hurt US and European stock markets on Monday and weighed on the dollar following a rebound in those sectors late last week.

Wall Street sold off, pulled lower by further weakness in oil prices as energy shares led declines, with major indexes giving back much of last week's strong gains.

Traders try to work out what is going on
Traders try to work out what is going on  Photo: Richard Drew

The Dow Jones industrial average fell 207.33 points, or 1.29 per cent, to 15,886.18, the S&P 500 lost 29.59 points, or 1.55 per cent, to 1,877.31 and the Nasdaq Composite dropped 72.69 points, or 1.58 per cent, to 4,518.49.

Anxiety over the impact of tumbling energy prices on global economic growth and central bank policies revived safe-haven demand for the yen, gold and US and German government debt.

Crude oil prices fell as much as 5 per cent as Iraq announced record-high oil production that will feed into an already oversupplied market, wiping out much of the oil price gains from of the biggest-ever daily rallies on Friday.

"Right now, you could track the direction of stocks when you see where oil is trading," said Brian Jacobsen, chief portfolio strategist at Wells Fargo Funds Management in Menomonee Falls, Wisconsin.


The oil-led market turbulence since the start of 2016 has raised hopes of more stimulus from major global central banks.

Last week, European Central Bank chief Mario Draghi signalled the bank was open to more monetary stimulus to combat weak growth and inflation in the euro zone.

Traders have bet the Federal Reserve would seek to soothe financial markets after its two-day meeting on US monetary policy that will begin on Tuesday.

Global markets slumped at the start of the year on fears that a slowdown in world No. 2 economy China would spread to the rest of the world, and oil prices sank to 13-year lows.

German business confidence deteriorated to an 11-month low in January, a survey showed, suggesting growing concern among company executives in Europe's largest economy.

"If the Fed puts too much emphasis on global developments, that could really harm sentiment," Jacobsen said.

US interest rates futures implied traders placed a 13 per cent chance the Fed will hike rates later this week.

The pan-European FTSEurofirst 300 index finished down 0.4 per cent, while Tokyo's Nikkei ended 0.9 per cent higher.

The MSCI all-country World Equity Index fell 0.4 per cent to 366.48.

Losses in oil and Wall Street pushed the US dollar lower. The dollar index, which tracks the greenback versus a basket of six currencies, slipped 0.2 per cent, to 99.363.

The yen edged up 0.25 per cent against the $US at 118.46 yen, and was steady against the euro at 128.40 yen .

Brent crude oil futures was down 5.2 per cent to $US30.50 a barrel, while US crude dropped 5.8 per cent to $US30.34.

Iraq's oil ministry told Reuters on Monday that oil output reached a record high in December, putting oil prices under renewed pressure.

US 10-year Treasury yields were down 3 basis points at 2.02 per cent, and 10-year German Bund yield was down 1 basis point at 0.397 per cent, as the fall in oil prices underpinned support for safe-haven debt.

Spot gold rose 0.7 per cent to $US1,105.40 an ounce.