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GLOBAL MARKETS-European stocks look to fight out of the global gloom

Published 2016-01-18, 04:30 a/m
© Reuters.  GLOBAL MARKETS-European stocks look to fight out of the global gloom
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* European stocks up, Asia & Gulf down
* Iran sanction lift hits oil
* U.S. markets closed for holiday

By Jamie McGeever
LONDON, Jan 18 (Reuters) - Many stock markets around the
world and oil prices slumped to multi-year lows on Monday amid
persistent worries over global growth, although European stocks
offered a chink of light in the gloom, staging an early bounce
following last week's sell-off.
Middle Eastern stocks plunged overnight, catching up with
the fall across global bourses on Friday, while the prospect of
a jump in Iranian crude exports after the lifting of sanctions
against the country weighed heavily on oil.
With U.S. markets closed for the Martin Luther King Day
holiday, any hope equity bulls have for a fight back from the
worst start to a year ever rest with Europe, where the main
indices have lost as much as 10 percent in just two weeks.
In early trading on Monday the FTSEuroFirst 300 index of
leading shares was up 0.7 percent .FTEU3 , Germany's DAX was up
0.6 percent .GDAXI , France's CAC 40 was up 0.4 percent .FCHI
and Britain's FTSE 100 was up 0.3 percent .FTSE .
"We have seen a positive open in Europe, though that looks
likely to be put to the test if Asia's market performance is any
guide," said Michael Hewson, chief market analyst at CMC Markets
in London.
"It's encouraging that, so far at least, European markets
are shrugging off Asia's losses," he said.
Gains at mobile telecoms gear marker Ericsson (ST:ERICAs) ERICb.ST and
luxury goods group LVMH LVMH.PA lifted the FTSEuroFirst off
its 1-year low struck on Friday.
There was less to cheer about in Asia, however. MSCI's
broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS fell to its lowest since October 2011 and was
last down 0.3 percent.
Japan's Nikkei .N225 tumbled as much as 2.8 percent to a
one-year low before closing 1.1 percent lower. It has lost 20
percent from its peak hit in June, meeting a common definition
of a bear market.
MSCI's emerging stock index .MSCIEF dropped to 6-1/2-year
low on Monday, and was last down 0.3 percent on the day.
The volatile Shanghai Composite index .SSEC initially
pierced through intraday lows last seen in August before paring
the losses and closed up 0.4 percent. It was still down nearly
18 percent this month.
On Wall Street the S&P 500 .SPX hit a 15-month low on
Friday, ahead of Monday's market holiday.

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IRAN OIL EXPORTS EYED
In oil markets, Brent crude fell below $28 a barrel LCOc1
for the first time since December 2003 after international
sanctions against Iran were lifted over the weekend, allowing
Tehran to return to an already over-supplied oil market.
U.S. crude also slumped to 12-year lows CLc1 , intensifying
the pressure on U.S. energy sector "junk" bonds. The Merrill
Lynch energy high yield debt index tumbled to its lowest in over
five years on Friday, posting its biggest weekly fall since
October 2008 and the second biggest fall ever .MERH0EN .
"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 JP Morgan said that oil-producing countries will
need to sell large quantities of stocks and bonds this year to
cover the shortfall in their budgets resulting from the slump in
oil prices.
They estimate sales of $110 billion bonds this year, up from
$45 billion last year, and $75 billion of equities compared with
$10 billion last year.
In currency markets the Chinese yuan rose 0.3 percent CNH=
in the offshore trade to 6.5966 per dollar, as Chinese
authorities continued to stamp down speculative yuan selling.
China will start implementing a reserve requirement ratio
(RRR) on some banks involved in the offshore yuan market, the
People's Bank of China (PBOC) 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 last stood at 117.31. The euro also edged down
against the dollar to $1.0891 EUR= .
The U.S. dollar has struggled to gain much ground since the
Federal Reserve's historic interest rate rise a month ago, as
the latest data added to indications that U.S. economic growth
braked sharply in the fourth quarter.
Following that data, the Atlanta Federal Reserve's
closely-watched GDPNow forecast model showed the U.S. economy is
on track to grow 0.6 percent in the fourth quarter, slowing
sharply from 2.0 percent growth in the third quarter.
ID:nL2N14Z2SI
Investors further cut back their Fed rate hike expectations,
with short-term interest rate futures 0#FF: pricing in only
one rate hike by the end of year, compared with two hikes priced
in at the start of year.
In European bond trading, yields rose by around 1-3 basis
points across "core" markets such as Germany and "peripheral"
markets like Spain.

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