The price of Brent crude oil plunged to within a whisker of $50 a barrel last night as fresh warning signs flashed over the global economy.
Fears over Greece pulling out of the euro; emergency money-printing measures from the European Central Bank; and slow global growth sent investors racing out of oil, and sent shares tumbling again. At one stage, Brent crude hit $50.52 a barrel – down $2.59 on the day, before settling at $51.10. The oil price has not been this low since March 2009.
On the stock markets, a 3 per cent fall for Japan’s Nikkei Average overnight was followed up in Europe as major exchanges fell, including London’s FTSE 100 index, which is already down nearly 4 per cent this year. In New York, stocks fell for the fifth session in a row, with the Nasdaq down 1.2 per cent and the Dow closing off 130 points at 17,371.
The flight from equities to bonds – driven by speculation that ECB president Mario Draghi could launch a €1 trillion (£658bn) quantitative easing programme within weeks – hit bond yields yesterday, with benchmark 10-year yields falling to 1.56 per cent in the UK and 1.89 per cent in the US, marking the first time they have fallen below 2 per cent in the world’s largest economy since May 2013.
Gold – the classic port in a storm – jumped by more than $10 an ounce to $1,212.84. The pound was also under pressure for a second day, falling to a 12-month low of $1.5176 against the dollar at one stage, after the latest industry snapshot from the Chartered Institute of Procurement & Supply revealed a wobble for the UK’s dominant services sector last month.
Although still well above the 50 mark that indicates growth, the Cips activity index slipped sharply from 58.6 to 55.8 in December – signalling the weakest growth for 19 months. In combination with weaker manufacturing and building surveys, growth across the wider economy is expected to have slowed to 0.5 per cent in the last quarter according to Markit, the survey compiler.
Markit’s chief economist, Chris Williamson, said: “The loss of momentum towards the year end will no doubt fuel worries that the upturn is too fragile to withstand higher interest rates.”
Markit’s latest data on private sector firms across the eurozone, meanwhile, warned that growth across the single currency bloc crawled along at the anaemic pace of 0.1 per cent in the final quarter of last year, further fuelling calls for stimulus from Mr Draghi.
“There’s no guarantee a renewed downturn will not be seen in 2015,” Mr Williamson said. Eurozone inflation figures today are likely to reveal prices falling across the region for the first time since 2009.
From China, an engine of global growth in recent years, the news was little better as a modest revival for services firms barely offset manufacturers’ recent woes. “We continue to believe that there is insufficient demand in the overall economy and more easing measures are warranted in the coming months,” HSBC said.Reuse content