Europe close: Collapse in oil futures hits stocks

European stocks sold off on the last day of the week after China’s central bank hinted that it might move to loosen the link between its currency and the US dollar.

That sent the prices of many commodities lower, albeit with the notable exception of some base metals.

The benchmark Stoxx Europe 600 index closed down 2.04% at 355.79, Germany’s DAX by 2.44% to 10,340.06 and France’s CAC 40 was 1.84% weaker.

As of 16:57 front month Brent crude futures were 4.3% lower to $38.09 per barrel on the ICE. Three-month copper futures on the other hand finished 2.7% higher to reach $4,712.50 per metric tonne in LME trading.

A somewhat mixed reading on US retail sales in November did little to help market sentiment.

Chinese central bank moves to ease pressure on yuan

An editorial posted to the People’s Bank of China's website on Friday argued it made more sense to measure the value of the yuan versus that of a basket of currencies instead of just the US dollar's, The Wall Street Journal reported.

Traders apparently interpreted that as a hint the Asian giant might be thinking of loosening the ‘crawling-peg’ between its currency, the yuan, and the US dollar.

Oil futures were already on the back foot after the International Energy Agency said growth in global oil consumption peaked last quarter and that oil stocks in OECD countries would continue rising next year.

Elections ahead in France

Not to be lost amid the torrent of figures and numbers, on 13 December French voters were set to cast their ballots in the country’s second round of regional elections, which it was thought might see the far-right FN party gain record support.

"We see this rise of radical politics across Europe as a key risk heading into 2016. The French regional election on Sunday represents the last test of the electorate before Presidential elections in 2017.

“This is one of three key political events in Europe in the coming years (Germany’s federal elections and the Brexit vote included)," Alberto Gallo, RBS head of macro strategy, said in a research note sent to clients.

Emerging markets still making themselves felt

Dual-listed insurer Old Mutual and South African-founded bank Investec were still under pressure following the sacking of South Africa’s finance minister Nhalnhla Nene earlier in the week, which weighed on the rand.

Norway’s Statoil moved lower after announcing a series of transactions with Spain’s Repsol in Norway, the UK, US and Brazil.