January 6, 2015 / 9:18 AM / in 3 years

Global stocks fall, bonds rise on oil, euro zone worries

Traders are pictured at their desks in front of the German share price index DAX board at the Frankfurt stock exchange on January 5, 2015.Remote/Stringer

NEW YORK (Reuters) - Stock prices fell on global markets on Tuesday, stuck in a dismal start to 2015 as tumbling oil prices and Greece's possible exit from the euro zone struck a note of fear and drove investors to safe-haven assets, including gold, the yen and low-risk government bonds.

A decline in Brent crude futures to a near 5-1/2-year low of $51 a barrel extended the oil market rout that began in mid-2014. The latest fall intensified concerns about how the dramatic price drop, due to sluggish global growth and a supply glut, will hurt earnings of oil companies and exacerbate disinflationary pressure worldwide.

With little sign where the oil price drop will stop, some analysts cautioned whether such a move might ripple across the vast derivatives market.

"You have a cross current here where it looks like a commodity bubble has totally burst," said Paul Mendelsohn, chief investment strategist at Windham Financial Services in Charlotte, Vermont. "And now I think people are beginning to wonder, out of the $200 trillion worth of derivatives out there, how much of it is commodity related, and who owns it?”

The Greek anti-bailout party Syriza held a slim lead in polls before the Jan. 25 national election, which rekindled speculation whether the euro zone might let Greece leave the economic bloc rather than renegotiate its international bailout.

Data on Tuesday showed euro zone manufacturers registered almost no growth in the fourth quarter, putting pressure on the European Central Bank to take bold steps to keep the region from slipping into recession.

Disappointing data on the U.S. services sector and factory orders also took a toll on markets on Tuesday.

The three major U.S. stock indexes fell for a fifth straight session, though they finished well above their session lows. For the Standard & Poor's 500, it was the longest such losing streak since late 2013.

The Dow Jones industrial average .DJI closed down 131.43 points, or 0.75 percent, to 17,370.22, the S&P 500 .SPX ended down 18.12 points, or 0.9 percent, to 2,002.46, and the Nasdaq Composite .IXIC finished down 59.84 points, or 1.29 percent, to 4,592.74.

The FTSEurofirst 300 index of top European shares .FTEU3 finished down 0.7 percent at 1,323.47. [.EU]

Japanese shares posted their worst one-day drop in 10 months, closing down 3 percent overnight .N225. [.T]

The MSCI world equity index .MIWD00000PUS, which tracks shares in 45 nations, fell 1.04 percent, to 403.80.

Investors poured more money into top-rated government debt, driving average yields on German DE10YT=RR, U.S. US10YT=RR and Japanese JP10YT=RR 10-year debt to less than 1 percent for the first time.

Ten-year Bund yields fell to a record low of 0.442 percent. The 10-year Treasuries yield fell below 2 percent for the first time since mid-October, last trading at 1.96 percent.

The dollar slipped 0.8 percent against the yen, at 118.67 yen JPY=, retreating further from a seven-year peak of 121.86 yen set last month. The euro shed more than 1 percent against the yen, to 141.23 yen EURJPY=, after hitting a two-month low at 140.91.

Gold hit a three-week high and last traded up 1.2 percent, to $1,218.30 an ounce.

In the oil market, Brent crude LCOc1 settled down $2.01, or 3.78 percent, at $51.10 a barrel. U.S. crude CLc1 settled down $2.11 or 4.22 percent, at $47.93 per barrel.

Additional reporting by Rodrigo Campos in New York; Patrick Graham, Anirban Nag, Emelia Sithole-Matarise, Jamie McGeever, Jan Harvey and Libby George in London; Editing by Nick Zieminski, Dan Grebler and Leslie Adler

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