By Chuck Mikolajczak
NEW YORK (Reuters) - Global equity markets slumped on Tuesday, denting the recent recovery in riskier assets as oil prices tumbled, reversing some of their recent bounce on signs a proposed output freeze by producers would not come to fruition.
After gains of more than 5 percent on Monday, which had helped push a gauge of world equities up more than 1 percent, both Brent (LCOc1) and U.S. crude (CLc1) were down more about 4 percent. Crude weakened after Saudi Oil Minister Ali Al-Naimi said he welcomed all sources of supply, while Iran was seen as unlikely to agree to an output cap.
The decline in crude weighed on both the energy (SPNY) and financial (SPSY) sectors on Wall Street. Concerns about bank exposure to the energy sector were highlighted by JP Morgan's (N:JPM) announcement that it will put aside an additional $500 million to cover potentially bad loans to energy companies.
"You still see this hypersensitivity to what's going on with the price of oil and the market's reacting on a day-to-day basis to that," said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
"It really shouldn't, but it gives you a sense of the nervousness out there."
U.S. crude futures were last down 4.5 percent at $31.90 a barrel and Brent (LCOc1) lost 3.8 percent to $33.36 a barrel. The commodity had shown signs of stabilization above $30 a barrel recently on hopes a production freeze by major producers could be agreed upon.
The Dow Jones industrial average (DJI) fell 170.93 points, or 1.03 percent, to 16,449.73, the S&P 500 (SPX) lost 19.49 points, or 1 percent, to 1,926.01 and the Nasdaq Composite (IXIC) dropped 48.58 points, or 1.06 percent, to 4,522.03.
European shares also moved lower on the crude weakness, along with and disappointing updates from Standard Chartered (L:STAN), down 6.7 percent, and BHP Billiton (L:BLT), down 6.1 percent. A weak sentiment reading of German manufacturers also raised concerns about the health of the region's largest economy.
Resources stocks (SXPP), down 3.2 percent, weighed heavily on European equity indices after the world's largest miner, BHP Billiton, posted its first loss in 16 years.
The pan-European FTSEurofirst 300 (FTEU3) index of leading shares closed down 1.3 percent. MSCI's index of world shares (MIWD00000PUS) was lost 0.92 percent.
In currency markets, the British pound
The euro
Investors' shift towards safer ground on Tuesday pushed the dollar lower against the yen, down 0.7 percent to 112.12 yen
The dollar's index against a basket of six major currencies (DXY) was little changed, up 0.01 percent at 97.386.
Benchmark 10-year U.S. Treasuries reversed earlier losses and were last up 10/32 in price to yield 1.7311 percent.