European shares plunge, US markets sink

European shares ended on Friday at their lowest since mid-December 2014, hit by losses in commodity-related stocks as BHP Billiton announced a major writedown and oil fell below $30 a barrel.

Some investors said stocks were deeply oversold and flagged hopes of more central bank intervention to help reverse the trend after three straight weeks of losses.

BHP Billiton shed 6.4 per cent, the top faller on the pan-European FTSEurofirst 300, after saying it would write down the value of its U.S. shale assets by $7.2 billion. That cemented expectations the company will be forced to cut its dividend for the first time in more than 25 years.

US stocks also sank in volatile trading, with the S&P 500 hitting its lowest point since August and the Dow dropping more than 400 points, as oil prices dived below $30 per barrel.

The technology sector was down 3.44 per cent, as Intel’s weak report weighed heavily on chip stocks.

The Stoxx Europe 600 Basic Resources index was down 6.3 per cent, with Rio Tinto, Glencore and Antofagasta also among top fallers.

All four stocks also suffered from target price cuts by Japanese bank Nomura. The oil and gas sector was also under pressure, down 3.8 per cent. Brent and US crude both fell below $30 a barrel, as markets braced for more oil supply from Iran.

Oil

“Stocks are being driven by oil, and given that the Iranian sanctions are due to be lifted, that’s causing even more nervousness about this glut of oil that we have,” said Zeg Choudhry, managing director of Lontrad.

Concerns over commodities and Chinese growth have marked a rocky start to the year for global markets. Chinese shares closed at their lowest level since December 2014, rocked again by falling oil.

The FTSEurofirst 300 ended down 2.8 percent at 1,297.1 points, making its third straight weekly loss. It fell 6.7 percent last week when China allowed its currency to devalue.

In Dublin, the Iseq closed 2.1 per cent weaker.

Enrico Vaccari, fund manager at Italy’s Consultinvest, said investors were testing central banks to see whether they had ammunition left to prop up markets and the economy.

“There is a symbolic poker match between the market and central banks. I don’t think China and oil are the real problem here,” he said “The market is trying to force the hand of central banks in the hope they unleash more stimulus. So far there has been no answer but at some point it will arrive.”

The European Central Bank holds its next policy meeting on Thursday.

Reuters