Oil prices tanked Friday to fresh five-year lows following a gloomy forecast for global crude demand and more weak Chinese economic data, sending European equities in a tailspin.
London’s benchmark FTSE 100 index slumped 2.49 percent to end the day at 6,300.63 points, while in Paris the CAC 40 sank 2.77 percent to 4,108.93 points and Frankfurt’s DAX 30 dropped 2.72 percent to 9,594.73.
Milan plunged 3.13 percent and Madrid fell 2.75 percent.
The slide in oil prices this week below the psychological $60 per barrel level hit share prices hard, with the FTSE 100 falling 6.6 percent over the week, the CAC 40 tumbling 7.0 percent and the DAX 30 retreating 4.5 percent.
On Friday, the US benchmark West Texas Intermediate (WTI) for January delivery plunged in New York to $57.34 per barrel — the lowest level since May, 2009 — having already closed under the psychological level of $60 on Thursday.
Brent crude for January meanwhile dived to $61.35 in London trading.
The oil market — which has shed almost 50 percent since June — plumbed the latest lows after the Paris-based International Energy Agency slashed its 2015 demand outlook, despite plunging prices which would normally lead to increased consumption.
Demand is set to grow by 0.9 million barrels a day to reach 93.3 million barrels, some 230,000 barrels less than the previous forecast, the IEA energy watchdog said in a report.
“Oil prices continue to dominate the markets as the IEA lowered oil demand expectations for the fourth time in five months,” said IG analyst Alastair McCaig.
The drop in oil prices hit energy sector shares hard as they eat into company profits.
– Energy sector hit –
Shares in oil services company Petrofac topped the FTSE 100 losers, shedding 6.4 percent to 678 pence.
BP fell 3.3 percent to 385 pence and Royal Dutch Shell’s B share gave up 3.4 percent to 2,031.5 pence.
Back in Paris, shares in French oil and gas giant Total dropped 3.4 percent to 41.14 euros.
At the same time, however, cheaper crude also helps stimulate economic growth in the longer term, as consumers have more free cash and stocks usually gain as companies post higher profits.
“While commodities are in free fall, the major indices will take a beating in the short term — but looking ahead should help lift the ailing economies out of the mire,” added analyst Mike McCudden at broker Interactive Investor.
Falling oil prices will also pull down inflation, which is already dangerously low in the eurozone, thus adding to pressure on the European Central Bank to stimulate the economy.
Greek stocks inched down 0.42 percent after a three-day slide that saw them lose a fifth of their value over fears of political instability after a gambit by the government that could trigger early elections as a far-left party leads in the polls.
In New York, US stocks followed European equity markets lower in opening trade on worries about plunging oil prices.
The Dow Jones Industrial Average had fallen 1.27 percent to stand at 17,373.63 points in midday trading.
The broad-based S&P 500 dropped 1.03 percent to 2,014.45, while the tech-rich Nasdaq Composite Index declined 0.52 percent to 4,683.63.
Markets were also hit Friday after China said industrial output expanded at its slowest pace in three months in November, while fixed asset investment, a measure of government spending on infrastructure, was also easing.
Shanghai rose 0.42 percent higher on hopes for further government stimulus measures while Hong Kong eased 0.27 percent.
Tokyo rose 0.66 percent as the yen eased after a recent pick-up, while Seoul added 0.27 percent, but Sydney slipped 0.22 percent.
– Ruble hits new low –
In foreign exchange, the ruble sank Friday to record lows on the back of sliding oil, despite Russia’s central bank hiking its interest rate the day before in an attempt to halt the currency’s plunge and the resulting price rises.
The ruble sank to fresh record levels of 72.25 against the euro and 57,98 against the dollar as the Moscow stock exchange opened, before rallying slightly as the central bank apparently intervened.
The euro meanwhile rose to $1.2475 from $1.2410 late in New York on Thursday.
Gold edged up to $1,217 from $1,216.25 on Thursday.