GLOBAL MARKETS-China worries send stocks down, rising supply hits oil
Equities also were slammed by a plunge in shares of Brazilian miner Vale SA wiped out about $16 billion in market value following the collapse of a tailing dam last week that killed at least 60 people. Vale shares dropped 22.6 percent in Sao Paulo trade. The dollar fell against a basket of currencies as traders awaited the Federal Reserve's two-day policy meeting ending Wednesday and U.S.-China trade talks this week.
The euro reached a 10-day high against the dollar ahead of voting in Britain's parliament on Tuesday that aims to break the Brexit deadlock. Caterpillar, a bellwether for global industrials, fell 9.2 percent as its quarterly profit widely missed Wall Street estimates on softening Chinese demand, a strong dollar and higher manufacturing and freight costs.
Nvidia slid 15.4 percent after the chipmaker cut its fourth-quarter revenue estimate by half a billion dollars, hit by weak demand for its gaming chips in China and lower-than-expected data center sales. When companies cite China as problematic regarding their earnings, investors realize China-related issues are going to spread, said Ryan Nauman, market strategist at Informa Financial Intelligence in Zephyr Cove, Nevada.
"Without China growing at a good clip it will be hard for the global economy and the U.S. to continue an expansion," Nauman said. Earnings at Chinese industrial firms shrank for a second straight month in December, hit by slowing prices and weak factory activity amid the protracted U.S.-Sino trade war.
The FTSEurofirst 300 index of leading regional shares closed down 0.96 percent while MSCI's all-country world equity index declined 0.77 percent. Stocks on Wall Street fell more than 1 percent.
The Dow Jones Industrial Average fell 291.41 points, or 1.18 percent, to 24,445.79. The S&P 500 lost 29.04 points, or 1.09 percent, to 2,635.72 and the Nasdaq Composite dropped 98.00 points, or 1.37 percent, to 7,066.87. Emerging market stocks lost 0.4 percent.
Volatility has picked up as investors fret about an economic cycle that is long in the tooth, leading to sharp reactions in the market to news, said Laura Kane, head of investment themes for the Americas at UBS Wealth Management. Equity markets have solid underpinnings with fourth-quarter earnings looking good, a likely truce in the U.S.-China trade talks and the Fed sounding a dovish message, leading her to be optimistic, Kane said.
"But the complication of volatility being uncomfortable and the fact we're later cycle, that's why we're seeing these larger reactions to market news than we're used to," she said. U.S. energy companies last week boosted the number of rigs drilling for oil for the first time since late December,
U.S. crude production, which rose to a record 11.9 million barrels per day late last year, has undermined sentiment in the oil market, traders said. Also weighing on oil prices are concerns about whether Chinese refiners will continue to import crude at 2018's breakneck pace.
U.S. crude settled down 3.17 percent at $51.99 per barrel and Brent fell 2.77 percent to settle at $59.93. In FX markets, the ICE index that tracks the dollar versus the euro, yen, sterling and three other currencies was down 0.07 percent at 95.730. It hit a near two-week low at 95.673 earlier in the session.
The euro rose 0.14 percent to $1.1428 while the Japanese yen strengthened 0.23 percent versus the greenback at 109.28 per dollar. Benchmark 10-year U.S. Treasury notes rose 3/32 in price to push their yield down to 2.7404 percent.
U.S. gold futures settled up 0.4 percent at $1,303.10 per ounce. (Reporting by Herbert Lash Additional reporting by Sruthi Shankar in Bengaluru Editing by Dan Grebler and Frances Kerry)
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