Oil slides below $100, euro sags

LONDON — Recession worries pushed the price of Brent oil briefly back under $100 on Wednesday and the euro moved closer to parity with the dollar.

European stocks rebounded, thanks to lower bond yields and bargain hunting, while US stocks dipped ahead of the release of the minutes of the latest US Federal Reserve (Fed) meeting.

Europe's benchmark crude oil contract, Brent North Sea, fell briefly under $100 per barrel in afternoon deals, following its US counterpart WTI which slumped below the symbolic level on Tuesday when prices plunged by nearly 10 per cent on concerns that a slowing global economy will dent demand for petroleum products.

Citi analysts have forecast that Brent could strike $65 later this year in the event of a prolonged worldwide economic downturn.

Meanwhile, the euro hit a fresh 20-year low point under $1.02 — the European single currency fast closing in on parity as traders eye recession for the eurozone and the ECB's slower moves to raise interest rates than the US Fed.

"A dip in government bond yields has paved the way for bargain hunters to swoop in and snap up European equities," said market analyst David Madden at Equiti Capital.

Investors worried rising bond yields would crimp the ability of eurozone governments to support their economies. 

Paris stocks rose 2 per cent while Frankfurt climbed 1.6 per cent.

Nevertheless, "the mood remains febrile", said Chris Beauchamp, chief market analyst at online trading platform IG.

"The drop in the euro and weakness in yields shows that investors remain very nervous about the economic prospects of the global economy, and the opportunistic bargain hunting in stocks may not have much staying power," he warned.

London's benchmark FTSE 100 index managed to gain 1.2 per cent despite the political turmoil after UK Prime Minister Boris Johnson was rocked by the resignation of finance minister Rishi Sunak.

Johnson vowed to stay in office and quickly appointed new ministers.

"Political risks do not seem to be having a major impact on UK assets," noted Markets.com analyst Neil Wilson.

"There are far too many bigger things on our minds right now — inflation, the economy slowing down, strikes."

Britain is in the midst of nationwide strikes — affecting in particular the transport sector — as wages are eroded by the rocketing inflation.

The pound dipped below $1.18, however.

Elsewhere, Asian equity markets closed mostly lower amid a fresh flare-up of coronavirus cases in parts of China that has seen some cities locked down as part of officials' zero-COVID policy.

Wall Street stocks were lower in late morning trading as investors awaited key economic releases and the release of the minutes of the Fed's last policy meeting.

Investors will be scrutinising the document for any signs that falling commodity prices might lead the Fed to be less aggressive with raising interest rates, which would lower the risk of pushing the US economy into recession.