EUROPE & ASIA: DOWN
European shares sank for a third day on Tuesday as a slide in oil prices showed no sign of easing off, supporting traditional safe-haven assets such as top-rated government bonds, the Japanese yen and the Swiss franc.
Asian shares had slumped overnight after another day of drama on oil markets that drove U.S. crude to less than $50 a barrel for the first time since the first half of 2009 and handed Wall Street its worst losses in three months.
The resulting bid for safety drove the average of yields on German DE10YT=RR, U.S. US10YT=RR and Japanese JP10YT=RR 10-year debt to less than 1 percent for the first time.
Also hit by a poor reading from a purchasing managers' survey in Italy, all of Europe's major exchanges were in negative territory an hour into morning trade.
"Global risk sentiment has been hurt by sliding stocks and oil prices. That is leading to a perception that there is a lack of demand and that has implications for global growth," said Jeremy Stretch, head of currency strategy at CIBC World Markets.
The FTSEuroFirst 300 index of leading shares .FTEU3, along with France's CAC40 .FCHI and Germany's DAX .GDAXI, were all down 0.8 percent. Britain's oil and gas heavy FTSE index lost 1.3 percent .FTSE.
Japan's Nikkei .N225 dropped 3 percent, its largest fall in almost 10 months while South Korean shares fell 1.7 percent to a 1-1/2-year low. Even high-flying mainland Chinese shares .CSI300 pulled back after hitting 5-1/2-year highs earlier in the session. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS fell 1.4 percent.
The slide in oil prices has shown little sign of abating in the new year, plunging as much as 6 percent on Monday as investors continue to reprice for broadly lower global demand and the impact of heavy U.S. shale drilling.
Brent crude LCOc1 fell by another 1.5 percent to less than $53 after data showed Russian oil output at post-Soviet era highs and Iraqi oil exports near 35-year peaks.
"Falls in oil prices are going beyond many people's expectations. This will put pressure on the earnings of U.S. energy firms," said Hirokazu Kabeya, senior strategist at Daiwa Securities in Tokyo.
Hit by the drop in U.S. 10-year yields and the general concern over global growth it reflects, the dollar fell more than half a percent against the yen to as low as 118.65 yen JPY=. It was also marginally lower against the Swiss franc, at 1.00655 francs CHF=.
For the moment, that has done little to dent the conviction of banks that the dollar will continue to rise this year.
"I would be a bit cautious about extrapolating too much so early in the year," said CIBC's Stretch. "This dip in risk appetite is likely to be temporary, and we should see the dollar recover against the yen and expect the euro to head lower."
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There are more than a dozen LNG export projects currently being proposed to US regulators, though across the industry almost no final investment decisions have been announced over the last 18 months and some developers have delayed their decisions into 2018 or beyond. Few firm supply purchase agreements have been announced for the projects that have yet to commit to moving forward.
According to the U.S. Energy Information Administration, Canada's largest energy customer has boosted domestic oil production from less than four million barrels per day in 2008 to 9.2 million bpd now, while gas output has risen from 67 million cubic feet per day to 89 million cf/d.
Egypt’s fledgling solar industry attracted $1.8 billion of investment, largely from the European Bank of Reconstruction and Development and the World Bank’s International Finance Corp.
International Brent crude futures LCOc1 were at $57.75 per barrel at 0733 GMT, up 58 cents from the previous close, after trading as high as $58.13. U.S. WTI crude was at $51.95 per barrel, up 50 cents. Earlier in the day, it traded as high as $52.22.