* European stocks down, follow Asia lower
* Lifting of Iran sanctions hits oil
* U.S. markets closed for holiday
By Jamie McGeever
LONDON, Jan 18 (Reuters) - European shares fell on Monday,
following Asia lower and led by banks after the European Central
Bank said it would quiz euro zone lenders about high levels of
bad loans, while oil prices tumbled on the prospect of more
supply from Iran.
With U.S. markets closed for the Martin Luther King Day
holiday, U.S. stock index futures slipped 0.3 percent SPc1 .
European shares opened higher but any prospect of a rally
after stocks hit their lowest since December 2014 on Friday
quickly fizzled out.
The pan-European FTSEurofirst 300 index .FTEU3 , which has
lost more than 10 percent this year, dropped a further 0.2
percent, with an index of euro zone banks .SX7E down 3.3
percent.
An ECB spokesman said on Sunday a number of banks would be
asked about high levels of non-performing loans. The burden of
such loans, particularly in Greece, Portugal, Spain and Italy,
is curbing the euro zone's economic recovery by limiting banks'
ability to lend.
Portuguese stocks .PSI20 were down 3.4 percent and Italy
.FTMIB lost 2.3 percent
"The uncertainty in the market, be it in Europe or wherever
else, is causing these banks to suffer," Mark Foulds, sales
trader at ETX Capital, said, adding that the sector was also
under pressure from recent volatility linked to China.
"When the markets fall like they have done, everyone feels
on edge. The market is dire, and there's not the liquidity that
there used to be, which can mean the market gets oversold."
Britain's FTSE 100 .FTSE index fell 0.4 percent.
Earlier, MSCI's broadest index of Asia-Pacific shares
outside Japan .MIAPJ0000PUS fell to its lowest since October
2011, down 0.7 percent.
Japan's Nikkei .N225 tumbled as much as 2.8 percent to a
one-year low before closing down 1.1 percent. It has lost 20
percent from a peak hit in June, meeting a common definition of
a bear market.
The volatile Shanghai Composite index .SSEC touched
intraday lows last seen in August but closed up 0.4 percent. It
remains down nearly 18 percent this month.
In oil markets, the prospect of a jump in Iranian crude
exports after international sanctions against the country over
its nuclear programme were lifted at the weekend weighed heavily
on oil.
Brent crude, the global benchmark, was last down 18 cents a
barrel at $28.76 LCOc1 , having earlier dipped below $28 for
the first time since December 2003.
"The lifting of key sanctions should allow it (Iran) to
increase crude exports this year by at least 500,000 barrels a
day on average, putting further downward pressure on oil prices
in the near term," Barclays (L:BARC) analysts said in a note on Monday.
Analysts at JPMorgan (N:JPM) said oil-producing countries will need
to sell large quantities of stocks and bonds this year to cover
shortfalls in their budgets resulting from the oil price slump.
They estimate sales of $110 billion bonds this year, up from
$45 billion last year, and $75 billion of equities compared with
$10 billion.
YUAN
In currency markets the Chinese yuan rose 0.5 percent CNH=
in offshore trade to 6.5830 per dollar, as Chinese authorities
continued to stamp down on speculative yuan selling.
China will start implementing a reserve requirement ratio on
some banks involved in the offshore yuan market, the People's
Bank of China said on Monday, in what appears to be its latest
attempt to stem speculation in the currency. ID:nL3N1521DA
The safe-haven yen gave up some of its gains after having
risen to a five-month high of 116.51 to the dollar JPY= on
Friday. It stood at 117.34, down 0.3 percent on the day. The
euro weakened 0.2 percent to $1.0890 EUR= .
The dollar has struggled to gain ground since the Federal
Reserve's historic interest rate rise a month ago. After data on
Friday indicating U.S. economic growth braked sharply in the
fourth quarter, short-term interest rate futures 0#FF: price
in only one hike by year-end, compared with two priced in as the
year began.
In European bond trading, yields were mostly flat.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^
Shanghai CSI 300 and global effects interactive https://t.co/YqIYLIbInP
Chinese A-shares vs developed and emerging stocks http://link.reuters.com/rac25w
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>