World stocks were set for a third straight week of losses on Friday and commodity currencies took another drubbing as oil prices fell back below $30 a barrel, keeping alive concerns about global growth.
European stocks fell more than 1.5%, heading back toward Thursday’s 13-month lows, while Asian shares skidded to 3-1/2 year lows.
Oil prices, which posted their first significant gains for 2016 on Thursday, came under fresh selling pressure as the prospect of additional Iranian supply loomed over the market. Elsewhere, BHP Billiton Plc (BHPLF), the largest foreign-owned shale producer in the U.S., said it would write down the value of its shale assets by $7.2 billion, darkening the outlook still further for dividends from natural resource companies (a habitual prop for stock prices).
Brent crude fell 3% to $29.78 by 0600 ET, heading for a weekly loss of more than 10%. U.S. crude fared even worse, sliding almost 5 percent to $29.75, and was set for a weekly decline of 10 percent.
The collapse in oil prices has spooked financial markets as investors worry about the health of the global economy, with a slowdown in China and volatility in its markets making for a nervous start to the year.
“It’s been another immensely volatile week,” said Philip Shaw, chief economist at Investec in London.
In China, the Shanghai Composite lost 3.5% percent to end, for the first time, below the level where intervention from the authorities had stopped the market rout last summer. The broader CSI300 tumbled 3.2%
Chinese shares extended their losses after data showed new yuan loans in December were well below the previous month’s lending, and broad M2 money supply growth also slowed, with both missing expectations.
China will publish a host of data on Monday and Tuesday, including fourth quarter gross domestic product.
U.S. retail sales data due later on Friday will also be on investors’ radar as they try to gauge the likelihood of the Federal Reserve raising interest rates again in March.
The combination of sliding oil prices and China concerns delivered another knock to commodity-linked currencies.
The Canadian dollar fell to C$1.4521 against its U.S. counterpart, its lowest level since early 2003, while the Australian dollar fell to a seven-year low at $0.6880. Russia’s ruble fell to a new 13-month low of all-time low of 77.54 to the dollar, while the benchmark Russian stock market index fell 4.3% to a new seven-year low.
However, the dollar was weaker against the euro and the yen, helping push the Dollar Index down 0.18 percent to 98.895.
“It’s another risk-off day,” said Chris Scicluna, head of economic research at Daiwa Capital Markets. “We had an awful session in Asia and that has spilt over into Europe.”
Worries that a depreciating Chinese yuan could spark competitive currency devaluations across the region have also hit global shares this month.
On Friday, the yuan, posted modest gains. That put the Chinese currency 0.1% up on the week, but it was still around 1.4% weaker against the dollar than it started the year and has lost nearly 5% since August.
