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 The pan-European FTSEEurofirst 300 hit a new 13-month low, while
Asian shares skidded to 3-1/2 year lows. That did not bode well for
the U.S. stock market open, with futures trading almost 2 percent
lower.
Oil prices, which posted their first significant gains for 2016 on
Thursday, hit 12-year lows as the prospect of additional Iranian
supply put the market under renewed pressure.
Brent crude fell 3.5 percent to $29.82, while U.S. crude slid almost
5 percent to $29.70. Both were heading for a weekly loss of more
than 10 percent following a similar tumble last week.
The collapse in oil prices has spooked financial markets and
battered an array of assets from commodity currencies to mining
stocks as investors fret about the health of the global economy. A
slowdown in China, long the world's main growth engine, and
volatility in its markets had made for a shaky start to 2016.
"There's an awful lot of uncertainty out there and oil prices
continue to decline below that key $30 a barrel mark," said Michael
Hewson, chief market analyst at CMC Markets.
"The big question is where oil will bottom out and until we have
some clarity on that markets are going to remain exceedingly feral."
RISK-OFF
MSCI's broadest emerging share index slipped around 1 percent on the
day to a fresh 6-1/2-year low, and was poised for a drop of more
than 3 percent over the week.
In Europe, global miner BHP Billiton shed more than 6 percent after
it said it would write down the value of its U.S. shale assets by
$7.2 billion.
"It's another risk-off day," said Chris Scicluna, head economic
research at Daiwa Capital Markets. "We had an awful session in Asia
and that has spilt over into Europe."
Both China's major stock indexes shed more than 3 percent, raising
questions about Beijing's ability to stop a sell-off that has now
reached 18 percent since the beginning of the year.
Chinese shares extended their losses after data showed new yuan
loans in December were well below the previous month's lending, and
broad M2 money supply growth also slowed, with both missing
expectations.
China will publish a host of data on Monday and Tuesday, including
fourth quarter gross domestic product.
U.S. retail sales data due later on Friday will also be on
investors' radar as they try to gauge the likelihood of the Federal
Reserve raising interest rates again in March.
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COMMODITY CURRENCIES TUMBLE
The combination of sliding oil prices and China concerns delivered
another knock to commodity-linked currencies.
The Canadian dollar fell to 13-year low at C$1.4545 against its U.S.
counterpart, while the Australian dollar fell to its lowest in
almost seven years at $0.6870.
"The oil market is just a mess and it all seems to be stemming from
that," said Tobias Davis, a currency hedging manager with Western
Union in London.
The U.S. dollar was weaker against the euro and the yen, helping
push the dollar index . down marginally to 98.980.
China's yuan meanwhile weakened sharply offshore, opening up a gap
of more than 1 percent with the steady onshore market, despite
central bank efforts earlier in the week to squeeze out speculators.
And as oil prices resumed their slide, investors continued to lower
their inflation expectations, pushing down government bond yields.
Two-year U.S. Treasury yields fell to 0.862 percent, their lowest
level in two months, while Germany's benchmark 10-year Bund yield
fell 3.5 basis points to 0.48 percent.
A key indicator of the euro zone markets' long-term inflation
expectations, the five-year, five-year forward breakeven rate, also
fell sharply.
(Additional reporting by Patrick Graham; Editing by Catherine Evans)
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