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 Brent crude <LCOc1> dropped to a 5-1/2-year low of $62.75 a barrel
and was set for a weekly loss of more than 8 percent. Falling oil
prices have pushed up volatility <.VIX> <.V2TX> <EURVOL=> across
asset classes.
The STOXX Europe 600 Oil & Gas Index <.SXEP> fell 1.6 percent,
dragging down the pan-European FTSEurofirst 300 index <.FTEU3> which
fell 1.4 percent and was on course for its biggest weekly loss since
May 2012. Political concerns over Greece also hurt European stocks,
though the Athens general index <.ATG> edged higher after losing 20
percent in three days.
Wall Street looked set to open lower, according to stock index
futures <ESc1> <DJc1>.
The Norwegian crown, strongly linked to oil export revenues, hit an
11-year low against the dollar <NOK=>, while the Canadian dollar
slumped to a 5-1/2 year trough against the greenback <CAD=D4>. There
was no end in sight for the decline of the Russian rouble, which hit
another record low.
"We're reaching a point where there's a risk of seeing corporate and
sovereign defaults in energy-producing countries, which could revive
global systemic risks," said Christophe Donay, head of strategy at
Pictet, which has $441 billion in assets under management and
custody.
Global crude prices have plunged in recent weeks on massive
oversupply, raising fears that deflation could hit economies around
the world. [O/R]
A spate of Chinese data triggered more concern for investors.
Factory growth slowed more than expected last month to its
second-worst reading since the global financial crisis and
investment expansion hovered near a 13-year low.
CORE GOVERNMENT BOND YIELDS FALL
All those concerns about deflation and slowing output helped inflows
into ultra-safe German government bonds.
German 10-year yields -- the euro zone benchmark -- dipped to a
record low of 0.637 percent <DE10YT=RR>. Yields moved lower after
weak demand for the European Central Bank's cheap bank loans on
Thursday highlighted the problems it faces in inflating its balance
sheet towards its intended 3 trillion euro target.
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Earlier, Japan's Nikkei stock average <.N225> ended up 0.7 percent,
extending gains as robust U.S. retail sales data lifted exporter
shares, but they still managed to book a loss of 3.1 percent for the
week.
One potential risk to the U.S. economy was reduced, at least
temporarily, as the Senate approved a two-day extension of
government funding late on Thursday to stave off shutdowns of
federal agencies that otherwise would have begun at midnight.
Spot gold <XAU=> slipped about 0.5 percent to $1,222.10 an ounce,
though it was still on track for a gain of over 2 percent for a week
in which it reached a seven-week high, on Wednesday.
"Overall there is a feeling out there that traders are now going
defensive on their positions and this is weakening the dollar,
thereby adding some support to precious metals," Saxo Bank's head of
commodity research Ole Hansen said.
(Additional reporting by Adam Rose, A. Ananthalakshmi, John Geddie,
Blaise Robinson and Jan Harvey)
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