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 Oil struggled to steady, having fallen as much as 7 percent on
Monday, and the glum macro mood sweeping back though markets saw
European shares follow Asia deep into the red.
Britain's FTSE 100, Germany's DAX and France's CAC 40 were
down 1.4-1.7 percent as BP’s biggest loss in 20 years and plans to
cut thousands more jobs dovetailed with rating cuts by S&P for Shell
and BHP Billiton to underscore commodity woes.
Banks were hit too, with Swiss bank UBS <UBSG.VX> slumping as much 8
percent after signs its wealthy customers were pulling money out.
In the currency markets, waning risk appetite nudged Japan's yen and
the euro up against the dollar. But the greenback was squeezing the
main emerging markets, up as much as 1 percent against the rouble ,
the rand, Mexico's peso and Malaysia's ringgit.
The Australian dollar also slipped after the country's central bank
held rates but left the door open to further easing after last
week's surprise move by Japan into negative interest rates.
"I don't think the market has much of a clue on what to focus on,"
said John Hardy head of FX strategy.
"It doesn't seem too convinced with the narrative of hooray for
central bank liquidity again, and the oil price going down and whole
reserve destruction theme is bad for risk appetite."
The lure of relative safety saw gains for benchmark U.S. and
European government bonds as Mario Draghi's reconfirmation on Monday
that the ECB will 'review' its monetary policy next month gave
yields an extra kick lower.
Concern over oil still dominated. Brent and U.S. crude oil had
tentatively steadied at $33.70 and $31.05 a barrel, having lost as
much as 7 percent overnight.
The pressure remains after weak economic data from China, Europe and
the United States, a U.S. forecast for mild weather and doubts that
big oil producing countries would agree to cut the global supply
glut.
Oil production in Russia hit a post-Soviet high in January, reaching
an average of 10.88 million barrels per day (bpd), data from its
energy ministry showed.
"(Prices) have just come back to reality a bit, although they are
holding water above $30 a barrel," said Ben Le Brun, market analyst
at Sydney's OptionsXpress, pointing to concern over rising oil
supplies and weaker economic data.
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AUSSIE BASHING
Overnight, MSCI's broadest index of Asia-Pacific shares outside
Japan lost 1.2 percent. Falls almost everywhere except China ,
which saw a 2 percent bounce, drove the index lower.
Japan's Nikkei ended down 0.6 percent as investors locked in profits
after two straight days of big gains following the Bank of Japan's
decision to introduce negative interest rates late last week.
"In a bear market, investors would use any rebound to cut equity
holdings, and that has been the trading pattern recently," said Zeng
Yan, an analyst at Zhongtai Securities, referring mainly to Chinese
markets.
"There are no changes in fundamentals: yuan depreciation concerns
are still there, the economy remains in bad shape, and market
liquidity tends to be tight."
The Australian dollar was still down about 0.8 percent at $0.7052 in
European trading, though it held above its recent seven-year trough
of $0.6827.
As expected, the Reserve Bank of Australia held interest rates
steady at a record low of 2.0 percent. Although the bank was hopeful
on growth prospects, it reiterated that there is scope for a further
cut if needed.
Markets appeared little fazed by Iowa's primary elections for the
U.S. presidential nomination. Among Republicans, U.S. Senator Ted
Cruz beat billionaire Donald Trump and for the Democrats, former
Secretary of State Hillary Clinton was in a virtual tie with rival
Bernie Sanders.
S&P 500 e-mini futures pointed to a 0.8 percent drop for Wall Street
later, though that was mostly tracking oil prices and the falls in
Europe and Asia.
(Reporting by Marc Jones; editing by Katharine Houreld)
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