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

Tue Jan 6, 2015 4:25pm EST
 
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By Richard Leong

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.   Continued...

 
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. REUTERS/Remote/Stringer