Cheap oil pummels markets

The jitters continued Wednesday on stock markets in Europe and Asia as volatile oil prices keep spooking investors and worries are growing about the state of the global economy.

Germany's DAX, France's CAC and Britain's FTSE indexes were all down around 3 percent, putting them in a position to make their biggest single-session losses in 2016. European shares were at their lowest levels since October 2014.

In Tokyo, shares plummeted 3.7 percent, their worst performance in nearly 15 months, after the US benchmark West Texas Intermediate slipped to a new 12-year low of $27.42 (25.05 euros) a barrel. Traders' risk aversion pushed up the yen against the dollar, putting pressure on Japanese exporters.

Meanwhile in Seoul, markets dived 2.3 percent, and in Hong Kong, the Hang Seng Index tumbled 3.82 percent to a 4-year low. That bourse has slumped almost 14 percent since the start of the year, hit by fears over the health of the Chinese economy, which ground to its slowest pace in a quarter of a century on Tuesday, according to official data.

Shanghai's benchmark composite index closed down a fraction over 1 percent, following a 3.25 percent bounce on Tuesday amid optimism that the bad economic data coming out of the world's second-largest economy could spur more stimulus from Beijing.

"Everything is falling"

"Everything is falling," Tsutomu Yamada, a market analyst at kabu.com Securities, told Bloomberg News.

"It's difficult for the market to rebound unless oil or something else truly hits bottom," he added.

"Whether it's oil, the dollar-yen, US shares, Hong Kong or Shanghai shares - something has to rebound."

"Drown in oversupply"

But the worst may not be over yet. The International Energy Agency (IEA) added fuel to the fire on Tuesday when it warned that the oil market "could drown in oversupply" in the wake of Iran's highly-touted return to international trading floors.

Freed from years of isolation and crippling sanctions, the energy giant has announced plans to immediately ramp up oil production and flood the market with an additional 500,000 barrels per day. The aim, Tehran says, is to double that amount within a year.

The combination of China's slowdown, weak commodity prices and turbulence in a number of emerging economies also prompted the International Monetary Fund (IMF) to cut its growth outlook for the global economy by 0.2 percentage points to 3.4 percent.

"We may be in for a bumpy ride this year, especially in the emerging and developing economies," Maurice Obstfeld, the IMF's chief economist, said on Tuesday.

pad/cjc (AFP, dpa, Reuters)