[NEW YORK] US and European shares fell on Wednesday as a drop in oil prices weighed on energy stocks, while two-year US Treasury yields ended August with the biggest monthly increase since November on growing expectations the Federal Reserve will raise interest rates.
Oil prices tumbled to more than two-week lows, with US crude falling more than 3.5 per cent, after government data showed a large weekly build in US crude and distillate stockpiles and a smaller-than-expected draw in gasoline.
The weakness in oil prices drove declines in the S&P energy index and the European STOXX 600 Oil and Gas sector , both of which closed down 1.4 per cent.
Investors focused, however, on U.S. non-farm payrolls data due on Friday, which could provide clues on the timing of the next Fed rate increase.
Data showing the US private sector added 177,000 jobs in August, compared with expectations of 175,000, boosted investors' optimism about Friday's numbers.
"People are too focused on transitory events and that's what is causing these ups and downs in oil prices," said John Conlon, chief equity strategist at People's United Wealth Management.
Yields on US two-year Treasuries, which are more sensitive than longer-dated maturities to expectations about the timing of Fed rate increases, rose 14 basis points for August.
Benchmark 10-year Treasury yields posted their biggest monthly increase in more than a year, of 12 basis points.
MSCI's all-country world equity index was last down 1.16 points, or 0.28 per cent, at 416.61.
The Dow Jones industrial average ended down 53.42 points, or 0.29 per cent, at 18,400.88. The S&P 500 closed down 5.17 points, or 0.24 per cent, at 2,170.95. The Nasdaq Composite closed down 9.77 points, or 0.19 per cent, at 5,213.22.
Europe's broad FTSEurofirst 300 index closed down 0.36 per cent, at 1,352.28.
The S&P 500 posted its first monthly decline, of just 0.1 per cent, in six, while the FTSEurofirst 300 rose 0.4 per cent, marking its second straightly monthly rise but dwarfed by July's 3.4 per cent gain.
Brent crude settled down US$1.33, or 2.75 per cent, at US$47.04 a barrel. US crude settled down US$1.65, or 3.56 per cent, at US$44.70 a barrel. Prices still posted their biggest monthly rise since April, with Brent gaining 11 per cent. "Not only are we getting shocking builds, we're also being squeezed by the bullishness of the US dollar," said Tariq Zahir, a trader in WTI timespreads at Tyche Capital Advisors in New York, on the declines in oil prices.
The US dollar index, which measures the greenback against a basket of six major rivals, hit a three-week high of 96.255 after the US jobs data on Wednesday.
While the index turned flat in afternoon trading, it was set for a gain of 0.5 per cent for August.
Spot gold slid to a two-month low of US$1,304.91 an ounce after the release of the US private payrolls data. US gold futures settled down 0.4 per cent at US$1,311.40.