* US crude oil falls under $28 a barrel, lowest since 2003
* European stock markets slump in biggest fall of 2016
* Risk aversion sends yen to highest vs dollar in a year
* Emerging markets sell-off, rouble on the brink
By Alistair Smout
LONDON, Jan 20 (Reuters) - European shares slid to their
lowest since October 2014 on Wednesday following losses in U.S
and Asian stock markets as the relentless slump in oil prices
continued to drag on risk assets.
The FTSEurofirst 300 .FTEU3 fell 3.3 percent, set for its
biggest single session loss of an already turbulent 2016 and
breaking through the December 2014 low which had been its recent
trough.
Germany's DAX .GDAXI , France's CAC .FCHI and Britain's
FTSE .FTSE were all down around 3 percent and also set for
their biggest fall of the year so far.
U.S. crude wallowed at its lowest since 2003 after the
world's energy watchdog warned the market could "drown in
oversupply". U.S. futures CLc1 shed 3.6 percent to $27.43
while Brent crude LCOc1 lost 3.1 percent to $27.87 a barrel.
Copper also slipped. Basic resources .SXPP and energy
sector .SXEP were the sectors that fell most steeply in
Europe, down 4.8 and 3.8 percent respectively.
Oil shares in Europe are down 13 percent already this year,
also at their lowest levels since 2003. That has been a major
weight on the FTSEurofirst 300, which is down more than 10
percent in 2016, which investors see as "correction" territory.
"I am quite pessimistic about the equity markets for the
next two to three months. I do not see a 2008-style scenario,
but I do see a bear market coming," said Andreas Clenow, hedge
fund trader and principal at ACIES Asset Management, suggesting
a further 10 percent fall to come.
Wall Street had seen its early gains on Tuesday erased by
the tumble in U.S. crude. U.S. stock futures ESc1 were down
2.1 percent on Wednesday, indicating a weak start.
Risk aversion boosted appetite for the yen, a traditional
safe-haven, which rose more than 1 percent against the dollar
JPY= to its highest level in a year, while sterling hit its
lowest since early 2014 GBPJPY= .
Demand for German Bunds, another safe-haven asset, was also
high, and the 10-year Bund yield fell to its lowest level in
more than eight months ahead of a European Central Bank policy
meeting on Thursday.
While the dollar fell against the yen, it was strong against
emerging markets, compounding the misery for many countries
already suffering from low oil prices.
Top emerging market shares .MSCIEF fell 2.9 percent to a
6-1/2 year low, while EM currencies were crushed. Russia's
rouble RUBUTSTN=MCX teetered on the brink of a record low of
80.10 to the dollar.
"This is a different kind of dollar strength altogether ...
this is quite clearly being driven by declining risk appetite,
higher market volatility and lower commodity prices," said Aroop
Chatterjee, a director of research at Barclays (L:BARC) in London.
"In this new world emerging markets are the ones that bear
the brunt of the dollar strength."
In Asia, stocks surrendered all of Tuesday's rare gains with
MSCI's broadest index of Asia-Pacific shares outside Japan
.MIAPJ0000PUS falling 3 percent on the day and hitting its
lowest since October 2011.
The Hong Kong stock market's benchmark index .HSI posted
its single biggest daily fall since early August, while Japan's
Nikkei .N225 closed down 3.7 percent. It is now 20 percent
below last year's peak, meeting the technical definition of a
bear market.
Chinese markets fared only marginally better amid mounting
talk that more stimulus may be on the way, possibly before the
Lunar New Year holidays in early February. A report in the
government-backed China Securities Journal said Beijing had the
policy space for further easing to support the economy.
The CSI300 index .CSI300 fell 1.5 percent, after rallying
more than 3 percent on Tuesday. The Shanghai Composite Index
.SSEC eased 1 percent.
China's central bank meanwhile revealed late on Tuesday that
it would inject more than 600 billion yuan ($91.22 billion) into
the banking system to help ease a liquidity squeeze expected
before the long Lunar New Year celebrations.
Such a move is usual before the holidays, however, and
stopped well short of an actual cut in bank reserve ratios.