European stocks plunged on Thursday after oil price volatility resulted in a sharp selloff on Wall Street the day before, a sign global economic and financial tumult will remain in the foreground for a while longer.
All of Europe’s major stock averages turned sharply lower on Thursday. London’s FTSE 100 Index was down 1% in afternoon trade. At the current pace, London’s main index is down nearly 5.5% since the start of the year.
The German DAX also fell 1.8%, with more than two-thirds of its members trading in the red. The DAX has declined a staggering 9% since the beginning of the year.
The pan-European STOXX 600 Index was down 1.6%.
European stocks followed their US counterparts lower after renewed volatility in the oil markets weighed on investor sentiment on Wednesday. The Dow Jones Industrial Average plunged 365 points on Wednesday, reversing back-to-back daily advances. The large-cap S&P 500 Index fell 2.5% and the Nasdaq plunged 3.4%.
US energy stocks declined nearly 2% on Wednesday amid renewed volatility in oil prices. North Sea Brent crude, the international benchmark, briefly fell below $30 a barrel after the US Energy Information Administration (EIA) reported a large spike in gasoline inventories, raising fresh concerns about waning demand in the world’s largest economy. Gasoline inventories rose by 8.4 million barrels last week, overshadowing a much smaller than expected build in commercial crude stockpiles.
Oil prices attempted another rebound on Thursday, with Brent futures climbing 22 cents or 0.7% to $30.53 a barrel on ICE Futures Europe. The West Texas Intermediate (WTI) benchmark for US crude climbed 42 cents or 1.4% to $30.90 a barrel on the New York Mercantile Exchange.
American stock futures traded higher ahead of Thursday’s opening bell, with the Dow Jones mini adding 80 points.
Asian stocks continued to sell-off on Thursday despite signs of stability in China. Japan’s Nikkei 225 Index plunged 475 points or 2.7%, its seventh decline in the past eight days. The Tokyo benchmark is down 9.4% year-to-date.
A stronger yen has been partly responsible for the recent bout of weakness for Japanese stocks. The USD/JPY exchange rate has declined nearly 4% since December 18.
Meanwhile, Chinese stocks pulled back from bear market territory, with the Shanghai Composite Index rallying 2%. The CSI 300 Index of the largest companies listed in Shanghai and Shenzhen also rose 2.1%.
Based out of Toronto, Canada, Husni Sam Borji is senior macroeconomics analysts who contributes regularly to TradersDNA, where he examines the global financial markets. Husni Sam has authored dozens of government reports and industry whitepapers, as well as thousands of financial articles. Husni Sam holds a BA from the University of Windsor and a Master’s degree in Economic Public Policy from McMaster University.
His expertise includes macroeconomics, fundamental analysis, industry research and global political economy.