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 Crude oil prices fell 3 percent as Iraq announced record-high oil
production feeding into a heavily over supplied market, wiping out
much of the gains made in one of the biggest-ever daily rallies last
Friday. [O/R]
That tumble briefly weighed on stocks, which recovered ground as
hopes of further monetary stimulus by major central banks helped
take the edge off the bearish sentiment that has dominated since the
start of the year.
The MSCI world equity index <.MIWD00000PUS> was up 0.1 percent,
almost 5 percent above 2-1/2 year lows hit last week.
Asian stocks <.MIAPJ0000PUS> rose 1.5 percent and moved further away
from last week's four-year low, while U.S. stock futures traded just
0.1 percent lower <ESc1>.
"Risk-asset markets have received a boost from the European Central
Bank hinting at stimulus last week, and investors are also looking
at whether the fall in stocks has run its course," said Philip Shaw,
chief economist at Investec in London.
 Global markets slumped at the start of the year on fears that a
slowdown in China would spread to the rest of the world economy,
while oil prices sank to 13-year lows.
German business morale fell to an 11-month low in January, a survey
showed, suggesting growing concern among company executives in
Europe's largest economy.
The Ifo survey reading of 107.3 compared with 108.6 in December and
was well below 108.4 forecast in a Reuters poll.
FED IN FOCUS
Market turbulence sets the backdrop for a meeting of the U.S.
Federal Reserve on Tuesday and Wednesday, while Bank of Japan
policymakers gather on Jan. 28-29.
Last week, the European Central Bank signaled it could deliver
further monetary stimulus, raising hopes that other central banks
might take the same path.
The market rout meanwhile could throw the Fed off its course of
gradual interest rate hikes.
"Attention will now turn to the U.S. Federal Reserve and the Bank of
Japan's latest policy decisions later this week, with the main focus
on the U.S. central bank in the wake of last month's historic
decision to raise rates for the first time in nine years," said
Michael Hewson, chief market analyst at CMC Markets.
Stock markets in London <.FTSE>, Frankfurt <.GDAX> and Paris <.FCHI>
reversed early falls to trade virtually unchanged on the day.
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Emerging market stocks extended their gains and hit a 10-day high,
while in Asia Shanghai stocks <.SSEC> added 1 percent and Tokyo's
Nikkei <.N225>, which slumped to a one-year low last week, rose 1.2
percent.
DOLLAR SLIPS
The dollar edged down against other major currencies as renewed
selling on oil markets drove investors into their current safe
havens of choice, the euro and yen.
The dollar slipped 0.3 percent to 118.40 yen <JPY=>, moving away
from a two-week high touched on Friday at 118.88. The euro firmed
0.2 percent to $1.0813 <EUR=>, after losing 0.8 percent on Friday.
The Russian rouble and other currencies sensitive to movements in
commodity prices, weakened. The rouble was 2 percent weaker against
the dollar at 79.80 <RUB=>, while the Australian dollar was down 0.3
percent to $0.6982 <AUD=D4>, backing off a nine-day high of $0.7046
on Friday.
Brent crude oil futures <LCOc1> fell 85 cents to $31.34 a barrel.
U.S. crude <CLc1> declined $1 cents to $31.18 a barrel.
Iraq's oil ministry told Reuters on Monday that oil output reached a
record high in December, putting oil prices under renewed pressure
after signs of recovery last week.
U.S. Treasury yields were down 1.7 basis points at 2.03 percent
<US10YT=TWEB>, as the fall in oil prices leant some support to
safe-haven debt.
Elsewhere, Greek two-year government bond yields fell 3 basis points
to 13.54 percent <GR2YT=TWEB> and the stock market rose 1 percent
<.ATG> after Standard & Poor's raised Greece's rating by one notch
to B minus on Friday.
(Additional reporting by Patrick Graham; Editing by Hugh Lawson)
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