Saudi Arabia cuts oil prices; Wall Street, European shares slip
(Reuters) – Global equity markets fell on Tuesday as European shares dropped and U.S. equities extended declines after a Reuters report saying central bankers in the euro area plan to challenge European Central Bank President Mario Draghi’s leadership style.
The bankers plan to challenge Draghi over what they see as his secretive management style and erratic communication and will urge him to act more collegially, ECB sources said.
Equities in Europe had already pared initial gains before the report after the European Commission cut its growth forecasts for the region. The Commission’s new outlook indicated the euro zone economy would expand by 0.8 percent this year and need another year to reach even a modest level of growth.
“Mario Draghi has done a spectacular job of jawboning, but where the rubber meets the road it is difficult for him to implement without signoff from Germany,” said Art Hogan, chief market strategist at Wunderlich Securities in New York.
“That is the structural difficulty in actually stimulating the euro zone, you’ve got one monetary policy and sixteen votes but all those votes aren’t created equal.”
The ECB will hold a policy meeting on Thursday, but is expected to hold off on fresh action, waiting for updated ECB staff forecasts next month and traction from its latest stimulus measures before any possible further steps.
U.S. stocks, which were modestly lower in the early stages of trading with midterm elections underway, also extended declines after the report.
Republicans were poised to make major gains and possibly recapture control of the U.S. Senate in a midterm vote on election day that could serve as a public referendum on President Barack Obama’s job performance.
Experts expect a focus on key environmental and energy issues after the midterms that could affect markets, such as a potential jump-start to energy-friendly policies that could shore up oil and gas companies.
Energy shares also weighed on U.S. equities, with the sector down 2.5 percent on continued weakness in oil prices, with Brent crude touching a four-year low of $82.08 a barrel.
U.S. crude oil was trading down more than 3 percent at $76.26 a barrel, while Brent crude futures LCOc1 fell 2.8 percent to $82.42, extending losses after top oil exporter Saudi Arabia cut prices to the United States.
