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 Data over the weekend showing China's foreign reserves fell for a
third straight month in January, as dollars were dumped to defend
the yuan and curb capital outflows, did nothing to calm investors.
Though the fall was less than some had feared, it was the second
biggest on record.
That followed a mixed U.S. jobs report on Friday that had sent
stocks on Wall Street lower.
Crude oil futures skidded over 2 percent to just over $33 by 5.15
a.m. ET, as a meeting between OPEC producers Saudi Arabia and
Venezuela provided little indication that steps would be taken to
boost prices. Earlier, oil had gained as much as 1 percent on hopes
that an agreement would be reached to curb supply.
With sentiment firmly in risk-off mode, the pan-European
FTSEurofirst 300 fell 2.3 percent to 1,253.33 points, its lowest
level since October 2014.
"It's a difficult market environment - I would have hoped for a
rebound in the market but after the last week's actions, certainly
this is off the table," said Baader Bank's head of equity strategy
in Munich, Gerhard Schwarz. "The economic newsflow has to improve.
So far it hasn't on a decisive scale."
Europe's losses pushed the MSCI world equity index , which tracks
shares in 45 countries, down 0.4 percent, taking its losses for the
month so far to around 3 percent already. January was the worst
month since August for the index, with losses of over 6 percent.
A launch by North Korea of a long-range rocket carrying what it
called a satellite also sparked concern and drew international
condemnation.
CHINA RESERVES FALL
Earlier, Asian shares had pared losses as a weaker yen helped
Japan's Nikkei snap a four-day losing streak, though trade was thin
with many regional markets closed for the Lunar New Year holiday.
MSCI's broadest index of Asia-Pacific shares outside Japan was down
0.1 percent, with Australian shares slipping a few points to end
nearly flat.
But Japan's Nikkei erased early steep losses as the dollar gained on
the yen, and ended up 1.1 percent.
Singapore, Hong Kong and mainland China were all closed for the new
year holiday. China, a focus of recent market concern, will be
closed for the entire week.
Beijing has been struggling to underpin the yuan, which faces
depreciation pressure as China's growth rate slows to its lowest
levels in a quarter of a century.
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"The Chinese currency is under quite notable market pressure and
that requires quite active intervention from the authorities," said
Bank of Tokyo-Mitsubishi UFJ currency economist Lee Hardman in
London. "That poses downside risk to Asian currencies and the
Aussie, which is seen as the China proxy."
The U.S. non-farm payrolls report on Friday showed an increase of
just 151,000 jobs last month, short of expectations for a rise of
190,000.
But the unemployment rate fell to 4.9 percent, the lowest since
February 2008, and wages rose, indicating some underlying strength
in the labor market despite the weak headline figure.
Weak U.S. economic data recently has led investors to pare back
their bets on steady interest rate increases by the Federal Reserve.
Speculators slashed bullish bets on the U.S. dollar for a sixth
straight week through Feb. 2, as net longs fell to their lowest
level since roughly the third week of October, according to Reuters
calculations and data from the Commodity Futures Trading Commission
released on Friday.
The dollar index, which tracks the greenback against a basket of six
major rivals, fell 0.2 percent on Monday to 96.841, approaching a
trough of 96.259 plumbed last Thursday, its lowest since October.
The yen, which is typically bought at times of risk aversion, gained
0.1 percent against the dollar to trade at 116.68.
(Additional reporting by Atul Prakash and Patrick Graham in London,
and Hideyuki Sano and Lisa Twaronite in Tokyo, editing by Larry
King)
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