Wall Street drops as oil prices hit 7-year low; European stocks up on weaker euro
Oil prices skidded to their lowest level in nearly seven years on Monday on continued concerns about oversupply, with losses in major oil shares dragging down U.S. indexes, while European stocks benefited from a weaker euro.
Brent crude prices LCOc1 fell to $41.20, their lowest since February 2009 after the Organization of the Petroleum Exporting Countries (OPEC) ended its policy meeting on Friday in disagreement over production cuts and without a reference to its output ceiling.
Oil majors Exxon (XOM.N) and Chevron (CVX.N) were the biggest drags on the U.S. Dow and the S&P 500 indexes. Increased strength in the dollar for a second straight session made it more expensive to hold crude positions.
Brent crude LCOc1 was last down $1.52, or 3.53 percent, at $41.48 a barrel, while U.S. crude CLc1 was last down $1.70, or 4.25 percent, at $38.27 per barrel.
“As a result of the collapse in oil and gas prices today, the market is worried that you’re going to see less capital spending, you’re losing a lot of a good-wage jobs in the oil patch, and people are worrying that we’re going to see a snowball of defaults among high-yield energy issuers,” said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.
A weaker euro helped boost European shares, which rose from three-week lows hit last week when the European Central Bank disappointed investors with its latest stimulus package. A weaker euro helps stocks by making European exports cheaper and competing imports more expensive.
An outlier among European stocks was Electrolux (ELUXb.ST), which sank over 13 percent after its deal to buy General Electric’s (GE.N) appliance business fell through.
MSCI’s all-country world equity index .MIWD00000PUS, which tracks shares in 45 nations, was last down 0.62 percent at 404.64.
The Dow Jones industrial average .DJI fell 0.91 percent at 17,684.69. The S&P 500 .SPX was down 0.91 percent, at 2,072.62. The Nasdaq Composite .IXIC was off 0.78 percent, at 5,101.98.
Europe’s broad FTSEurofirst 300 index .FTEU3 added 0.45 percent, and was last at 1,464.4. The euro EUR= was last down 0.32 percent, at $1.0849.
The dollar rose on expectations the U.S. Federal Reserve is on track to raise interest rates next week in the wake of a solid November jobs report. The dollar index .DXY, which tracks the greenback versus a basket of six currencies, rose 0.29 percent, to 98.639.
“It’s pretty much a done deal they will move,” Charles St-Arnaud, currency strategist at Nomura Securities International in New York said of the Fed, which will hold a policy meeting on Dec. 15-16.
