Europe: Stocks slump on rising oil stocks

[LONDON] Higher than expected oil stocks topping levels not seen since the 1930s and suggesting weak global economic demand helped push stock markets down Wednesday.

The latest figures from the US Department of Energy showed commercial reserves of crude as having passed the 500 million barrel mark to 502.7 million barrels.

That helped to depress European markets down for a second day running, following on from sharp losses across Asia although sentiment did get a small boost from a mega-takeover involving China.

London, Frankfurt and Paris all shed around 1.5 per cent while Milan lost 2.8 per cent, dragged down by sharp weakness in the volatile banking sector.

Oil prices rebounded after slipping back below US$30 a barrel, enough to edge Wall Street higher at the opening.

"Another down day in Europe, taking its cues from Asia as the demise of the oil prices continues to suppress any real risk appetite," said Brenda Kelly, head analyst at traders London Capital Group.

"Energy and financials are the underperformers today overall. Oil continues to drag on the FTSE especially in light of BP's (poor) set of results yesterday which tends to set the scene for Shell tomorrow morning when it reports its numbers." Among the biggest fallers, Barclays shed 4.7 per cent, BP lost 0.8 per cent and Societe Generale slid 3.0 per cent.

Top gainer was the world's leading luxury products group LVMH, which rose 4.5 per cent record on the back of record annual sales and soaring operating profit, reported late Tuesday.

Despite the Asian economic turmoil, China National Chemical Corp (ChemChina) Wednesday offered to buy Switzerland's pesticide and seed giant Syngenta for US$43 billion, which would be a record overseas purchase by a Chinese firm.

The deal is the latest in a string of overseas investments for China's biggest chemical company, also known as ChemChina, as Beijing prods its companies to expand abroad.

"US markets look set for a higher and less volatile open on Wednesday with merger news offering a source of optimism after the agreed deal between Syngenta and ChemChina and Yahoo hinting at a possible sale," said CMC Markets analyst Jasper Lawler.

Yahoo meanwhile on Tuesday said it is cutting 15 per cent of its workforce and narrowing its focus as it explores "strategic alternatives" for the future of the faded Internet star.

Oil's ongoing travails have continued to cast a pall over markets with recent price plunges to 12-year lows helping to wipe trillions of dollars off share valuations and even raising fears of recession.

But slumping oil prices do substantially reduce costs for companies, especially airlines.

US benchmark West Texas Intermediate crashed more than 11 per cent on Monday and Tuesday to fall back through the US$30 level for the first time since January 21 before Wednesday brought some respite.

However, dealers remain on edge ahead of a US report analysts warned could see a further increase in stockpiles.

Five minutes after Wall Street opened, the Dow Jones Industrial Average was up 0.51 per cent at 16,235.82 points but then slid just into the red as did the broad-based S&P 500 and the tech-rich Nasdaq Composite Index after early small gains on news that private-sector employers added 205,000 jobs in January, ahead of the forecast 190,000.

AFP