Oil prices rebounded higher yesterday, coming off 10-month lows, but equities failed to gain much traction.
While prices of the major oil contracts gained more than 1.5% in trading, European stocks posted only minor gains.
Frankfurt and Paris each ended with gains of 0.2% at 12,794.00 points and 5,281.93 points respectively, boosted by the best European consumer confidence figures since the financial crisis.
London’s FTSE 100, meanwhile, ended down 0.1% at 7,439.29 points.
Market analyst David Madden at CMC Markets blamed oil prices, which, even with the rebound yesterday, have continued their downward spiral.
“The turbulence in the energy market is weighing on investor sentiment,” he said.
“Oil has dropped a substantial amount since March and dealers are worried it could diminish inflation and growth prospects,” he added.
Low oil prices are a boon for consumers and generally support economic growth.
However low inflation can ultimately lead to deflation, or a prolonged period of falling prices, causing consumers to hold off on purchases in the hopes that the cost of goods will drop even further.
“While oil remains relatively low, it will chip away at investor confidence,” Madden said.
Oil has been in the doldrums on stubborn concerns over a vast supply glut, casting a dark shadow over the energy sector.
While oil prices rose yesterday on news of falling US inventories, this followed heavy declines caused by the market staying awash in crude and they remain down nearly a fifth from peaks two months ago despite Opec and Russia agreeing to extend production cuts.
New York crude touched a 10-month low of $42.05 a barrel on Wednesday.
London Brent oil meanwhile hit $44.35, a trough last seen in November.
“Overall, the market remains fixated on what happens with oil,” Chris Beauchamp, chief market analyst at trading firm IG, said.
Wall Street stocks opened higher, with the Dow up 0.03%.
“US equities are managing minor gains in early-morning action as crude oil prices appear to be stabilising, but are still in recently-reached bear market territory,” said analysts at brokerage firm Charles Schwab.
Shares in American Airlines rose 1.2% on news that Qatar Airways is seeking to buy about a 10% stake in the US carrier.
In Asia, shares in Japanese airbag maker Takata suffered another crushing collapse, plummeting more than 50% on fears the company at the centre of the auto industry’s biggest-ever safety recall is headed for bankruptcy.
The Tokyo-based car parts giant, facing lawsuits and huge recall-related costs over a bag defect linked to at least 16 deaths globally, has suffered a share-price plunge for four straight days.
Traders work in front of the DAX board at the Frankfurt Stock Exchange yesterday. The DAX ended the day with gains of 0.2% at 12,794.00 points.
