European stocks resumed their decline on Monday, as energy producers fell for the eighth time in ten sessions amid plunging oil prices.
Europe’s major averages were unable to hold gains at the start of the week, swinging lower after a rout in commodities intensified. London’s FTSE 100 Index fell 0.7%, Frankfurt’s DAX declined 0.9% and the IBEX 35 in Madrid was also down more than 1%. The pan-European STOXX 600 declined for a fifth consecutive day, falling 1.2%.
According to analysts polled by Reuters, European stocks are unlikely to regain their 2015 peaks.
Declines in Europe followed a mixed session for Asian stocks. Tokyo’s Nikkei Index declined nearly 350 points or 1.8%, its third decline in the past four sessions.
In China, the Shanghai Composite Index rebounded 2.5% after declining sharply at the end of last week. Hong Kong’s Hang Seng Index closed down more than 150 points or 0.7%.
US stocks were also trading lower after the opening bell, with the S&P 500’s materials component down 1.7%. Energy stocks were also down 0.6% in the morning session.
The rout in oil prices continued on Monday, with Brent crude falling below $37 a barrel on its way to new seven-year lows. The international benchmark reached a session low of $36.33 a barrel. It would eventually settle at $37.23 a barrel, down 70 cents or 1.9% on ICE Futures Europe.
Brent crude is trading just above the 2008 financial crisis low of $36.20 a barrel. A fall below that level would push the contract to its lowest level since mid-2004.
The West Texas Intermediate (WTI) benchmark for US crude was down 87 cents at one point during the day. It would settle down 7 cents or 0.2% at $35.55 a barrel on the New York Mercantile Exchange.
At some point over the next two days global investors will turn their attention to the Federal Reserve policy meetings, where officials are expected to raise interest rates for the first time in nearly a decade. US rate futures implied last week that traders see a 79% likelihood of a rate rise on Thursday.
Thursday’s rate announcement will also be accompanied by a summary of economic projections covering GDP, employment, inflation and the Fed’s “dot plot” chart of interest rate expectations.
The Fed will hold its first rate meetings of 2016 on January 26-27 in Washington.
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.