* European stocks hit 16-month lows
* Oil falls over 2 percent, low hopes of supply cut
* Lunar New Year closes most Asian markets
* Nikkei erases early losses and ends up 1.1 pct
By Jemima Kelly
LONDON, Feb 8 (Reuters) - European shares plunged to
16-month lows on Monday, extending a aggressive sell-off, while
bond yields and oil also fell as investors shed risky assets on
persistent concern over the pace of global growth.
Data over the weekend showing China's foreign reserves fell
for a third straight month in January, as dollars were dumped to
defend the yuan and curb capital outflows, did nothing to calm
investors. Though the fall was less than some had feared, it was
the second biggest on record
That followed a mixed U.S. jobs report on Friday that had
sent stocks on Wall Street lower.
Crude oil futures skidded over 2 percent to just over $33 by
1015 GMT, as a meeting between OPEC producers Saudi Arabia and
Venezuela provided little indication that steps would be taken
to boost prices. Earlier, oil had gained as much as 1 percent on
hopes that an agreement would be reached to curb supply O/R .
With sentiment firmly in risk-off mode, the pan-European
FTSEurofirst 300 .FTEU3 fell 2.3 percent to 1,253.33 points,
its lowest level since October 2014.
"It's a difficult market environment - I would have hoped
for a rebound in the market but after the last week's actions,
certainly this is off the table," said Baader Bank's head of
equity strategy in Munich, Gerhard Schwarz. "The economic
newsflow has to improve. So far it hasn't on a decisive scale."
Europe's losses pushed the MSCI world equity index
.MIWD00000PUS , which tracks shares in 45 countries, down 0.4
percent, taking its losses for the month so far to around 3
percent already. January was the worst month since August for
the index, with losses of over 6 percent.
A launch by North Korea of a long-range rocket carrying what
it called a satellite also sparked concern and drew
international condemnation.
CHINA RESERVES FALL
Earlier, Asian shares had pared losses as a weaker yen
helped Japan's Nikkei snap a four-day losing streak, though
trade was thin with many regional markets closed for the Lunar
New Year holiday.
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS was down 0.1 percent, with Australian shares
.AXJO slipping a few points to end nearly flat.
But Japan's Nikkei .N225 erased early steep losses as the
dollar gained on the yen, and ended up 1.1 percent.
Singapore, Hong Kong and mainland China were all closed for
the new year holiday. China, a focus of recent market concern,
will be closed for the entire week.
Beijing has been struggling to underpin the yuan, which
faces depreciation pressure as China's growth rate slows to its
lowest levels in a quarter of a century.
"The Chinese currency is under quite notable market pressure
and that requires quite active intervention from the
authorities," said Bank of Tokyo-Mitsubishi UFJ currency
economist Lee Hardman in London. "That poses downside risk to
Asian currencies and the Aussie, which is seen as the China
proxy."
The U.S. non-farm payrolls report on Friday showed an
increase of just 151,000 jobs last month, short of expectations
for a rise of 190,000.
But the unemployment rate fell to 4.9 percent, the lowest
since February 2008, and wages rose, indicating some underlying
strength in the labour market despite the weak headline figure
Weak U.S. economic data recently has led investors to pare
back their bets on steady interest rate increases by the Federal
Reserve.
Speculators slashed bullish bets on the U.S. dollar for a
sixth straight week through Feb. 2, as net longs fell to their
lowest level since roughly the third week of October, according
to Reuters calculations and data from the Commodity Futures
Trading Commission released on Friday
The dollar index .DXY , which tracks the greenback against
a basket of six major rivals, fell 0.2 percent on Monday to
96.841, approaching a trough of 96.259 plumbed last Thursday,
its lowest since October.
The yen, which is typically bought at times of risk
aversion, gained 0.1 percent against the dollar to trade at
116.68 JPY=EBS .