Equities volatile on oil swings as Fed decision looms

Mon Dec 14, 2015 4:21pm EST
 
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By Chuck Mikolajczak

NEW YORK (Reuters) - Global equity markets swung between gains and losses on Monday, as volatile oil prices rebounded from multi-year lows while weakness in credit markets weighed on sentiment ahead of an expected U.S. interest rate hike later this week.

Brent crude LCOc1 settled down 0.03 percent at $37.92 after falling as low as $36.33 a barrel, its weakest since December 2008. A fall below $36.20 would take oil down to levels not seen since 2004. U.S. crude CLc1 settled up 1.9 percent at $36.31 after earlier falling as low as $34.53.

The early declines in energy weighed on commodity stocks in Europe, which turned negative after a positive start, while the S&P energy sector .SPNY reversed course and was up 0.8 percent after falling as much as 1.3 percent early in the session.

Jitters in high-yield bond markets, which are among the most vulnerable to higher U.S. interest rates, also rattled investors. Lucidus Capital Partners has liquidated its entire portfolio and plans to return the $900 million it has under management to investors next month, according to a media report.

The SPDR Barclays High Yield Bond ETF JNK.P was off 0.8 percent at $33.38 and the iShares iBoxx High Yield Corporate Bond ETF HYG.P lost 0.9 percent at $78.83.

"It's the (Fed) communiqué that's going to count, but the real problem here is the junk bond market, which is tied to oil prices," said Peter Cardillo, chief market economist at First Standard Financial in New York.

"A lot of paper written to oil companies is in question, and so it ties in with the price of oil."

MSCI's all-country world index .MIWD00000PUS lost 0.4 percent, while the pan-European FTSEurofirst 300 .FTEU3 index closed down 1.8 percent to 1,371.76, as an early gain of 1 percent evaporated.   Continued...

 
Traders work on the floor of the New York Stock Exchange shortly after the opening bell in New York December 9, 2015. REUTERS/Lucas Jackson