Europe open: Stocks drop sharply on weak Asian cues as oil prices slide

European stocks fell sharply in early trade, taking their cue from a downbeat Asian session as oil prices resumed their slide.

At 0850 GMT, the benchmark Stoxx Europe 600 index, France’s CAC 40 and Germany’s DAX were all 3% weaker.

“Ugly; very very ugly, describes current equity markets, with momentum swinging negative yet again and the bears firmly in control,” said Rebecca O’Keeffe, head of investment at Interactive Investors.

“The fledgling hope from yesterday that markets were on the turn has been quashed by sharp overnight falls in Japan and Asia which has seen European markets fall aggressively. With every upturn being followed by deeper falls, investors are increasingly wary as it becomes more and more difficult to determine what might happen next.”

In Asia, China’s Shanghai Composite fell 1%, Hong Kong’s Hang Seng lost 3.8% and Japan’s Nikkei 225 ended 3.7% lower, entering a bear market.

Meanwhile, oil prices were under pressure again, with West Texas Intermediate down 3.4% at $27.49 and Brent crude 2.3% lower at $28.11.

“Oil prices remain under pressure, but the consumer benefits of lower energy prices and higher disposable income have yet to filter through to the wider equity market, which remains unremittingly negative in the face of further prospective asset sales by oil exporting countries' sovereign wealth funds,” said O’Keeffe.

On Wednesday the International Energy Agency warned that oil markets could “drown in oversupply”, adding that Iran’s return to the market is unlikely to be balanced out by production cuts from other countries.

Resources and energy stocks suffered the brunt of the losses, with the Stoxx 600 index for basic resources down 4% and the sub-index for oil and gas 3.1% lower.

In corporate news, BHP Billiton was under the cosh after the miner cut its iron ore production guidance in the wake of the Samarco disaster.

Shell was also in the red after the oil major said its profit fell by up to 50% in the fourth quarter and announced plans to cut up to 10,000 jobs in a cost-cutting drive.

Still to come in terms of data, US CPI and housing starts are at 1330 GMT.