Daily Management Review

Oil Price Fall Further Over Iran Concerns as Banks Drag Down European Markets


Oil Price Fall Further Over Iran Concerns as Banks Drag Down European Markets
Led by banks after the European Central Bank said it would quiz euro zone lenders about high levels of bad loans, European shares fell on Monday toeing the line of the Asia markets. On the other hand prices of crude continued to tumble on the prospect of more supply from Iran.
U.S. stock index futures slipped 0.3 percent as U.S. markets remained closed for the Martin Luther King Day holiday.
Stocks hit their lowest since December 2014 on Friday and any prospect of a rally was quickly fizzled out even as European shares opened higher.
With an index of euro zone banks down 3.3 percent, the pan-European FTSEurofirst 300 index, which has lost more than 10 percent this year, dropped a further 0.2 percent.
A number of banks would be asked about high levels of non-performing loans, an ECB spokesman had said on Sunday. The euro zone's economic recovery is being curbed by the burden of such loans, particularly in Greece, Portugal, Spain and has limited banks' ability to lend.
"The uncertainty in the market, be it in Europe or wherever else, is causing these banks to suffer. When the markets fall like they have done, everyone feels on edge. The market is dire, and there's not the liquidity that there used to be, which can mean the market gets oversold," Mark Foulds, sales trader at ETX Capital, said, adding that the sector was also under pressure from recent volatility linked to China.
Britain's FTSE 100 index fell 0.4 percent.
There was a fall of 0.7 percent for MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS and reached its lowest since October 2011. \
Before closing down 1.1 percent, Japan's Nikkei tumbled as much as 2.8 percent to a one-year low. Meeting a common definition of a bear market, the currency has lost 20 percent from a peak hit in June.
The intraday laws for the volatile Shanghai Composite index were last seen in August. It closed up 0.4 percent but still remains down nearly 18 percent this month.
The oil market was weighed down by the prospect of a jump in Iranian crude exports after international sanctions against the country over its nuclear program were lifted at the weekend
Having earlier dipped below $28 for the first time since December 2003, Brent crude, the global benchmark, was last down 18 cents a barrel at $28.76.
"The lifting of key sanctions should allow it (Iran) to increase crude exports this year by at least 500,000 barrels a day on average, putting further downward pressure on oil prices in the near term," Barclays analysts said in a note on Monday.
In order to cover shortfalls in their budgets resulting from the oil price slump, oil-producing countries will need to sell large quantities of stocks and bonds this year said analysts at JPMorgan. J P Morgan analysts are expecting sale of bonds worth $110 billion, up from $45 billion last year, and sale of equities worth $75 billion compared with $10 billion.