European shares continued the rout on global markets as pessimism over falling oil prices and economic growth weighed on investors, BBC reports. The main stock markets in London, Frankfurt and Paris fell between 1% and 2%, tracking steep overnight losses on Wall Street and on Asian indexes. The pound hovered close to five-and-half-year lows against the dollar.
The FTSE 100 index fell 1.9% in early trade before paring losses. It was 1.3% lower at 13:47 GMT. Germany’s Dax index and the Cac 40 in Paris were both 2% lower. Brent crude oil fell another 0.4% to $30.15 a barrel earlier in the day, having briefly drifted below $30, before recovering and edging higher to $30.51.
“This market is in contraction and I expect this contraction to continue for the next six months,” Beaufort Securities’ sales trader Basil Petrides told Reuters. The falls followed losses in Asia. Japan’s Nikkei index closed down 2.7%, having dropped more than 4% at one point.
Hong Kong’s Hang Seng eased off two-and-a-half-year lows to finish down 0.6%. The Shanghai Composite, which has endured torrid trading in recent months, was one of the few bright spots, rebounding nearly 2%.
Investors were spooked by sharp falls on Wall Street, where the Dow Jones and S&P 500 fell 2.2% and 2.5% respectively. Joshua Mahony, market analyst at IG, said that fear may be masking some positive economic signs. “The issue here is that before long people will forget why they are selling, but continue to sell simply due to the fear factor. Yesterday felt like the beginning of that.
“US crude inventories actually rose less than expected yesterday, which ordinarily would have been bullish for oil prices, yet once more the trend was the most important thing and everyone is looking for another reason to sell crude, which of course means the FTSE 100 in particular is dragged lower once more.”
There are fears that the continuing low crude price reflects a slowdown in some economies and could weigh on growth in emerging markets, many of which rely on oil revenues. On Wednesday, Russia’s Prime Minister, Dmitry Medvedev, warned tumbling oil prices could force his country to revise its 2016 budget.
He said that the country must be prepared for a “worst-case” economic scenario if the price continued to fall. Analysts at Cenkos Natural Resources said: “With no apparent signs of strengthening demand, and only further indicators of future global supply growth, the outlook for oil prices is leading most market watchers to ratchet down estimates for oil prices in 2016 and 2017.”
Oil and gas projects worth $380bn have been postponed or cancelled since 2014 as companies slash costs to survive the oil price crash, including $170bn of projects planned between 2016 and 2020, according to a report from energy consultancy Wood Mackenzie.