Oil prices slumped to five-year lows on Wednesday and U.S. and European equity markets fell as investors worried about the Greek and Chinese economies withdrew from riskier positions and bought Japanese yen, which rose against the U.S. dollar.
Brent crude oil futures fell to $64.04 a barrel, the lowest since September 2009, before recovering a bit as producers forecast lower demand for oil next year. U.S. and European markets were dragged lower by losses in energy, as the S&P energy index .SPNY was last off more than 3 percent as the worst performing sector.
Oil prices have been under pressure from the dollar's strength and OPEC's decision against an output cut, with Brent down more than 40 percent from its June high. Brent crude LCOc1 was last down $2.76, or 4.13 percent, at $64.08 a barrel. U.S. crudeCLc1 was last down $2.83, or 4.43 percent, at $60.99 per barrel.
"Crude oil is under punishment today once again on the back of the OPEC news. OPEC has cut its demand forecast for next year and this has unbalanced the demand and supply equation further and traders are not liking the sound of this at all," said Naeem Aslam, chief market analyst at AvaTrade.
The drag on European energy shares sent the region's broad FTSEurofirst 300 index .FTEU3 into negative territory for a third straight session.
Chinese shares rebounded after data showed inflation in the world's second-biggest economy hit a five-year low last month, kindling hopes for more monetary policy easing. The losses in U.S. and European shares overshadowed the gains, however.
In Europe, Greek shares were among the top losers on mounting concerns over the country's politics, down 1 percent, adding to Tuesday's roughly 13 percent plunge.
The worries over Greece and the weakness in Chinese economic data sent the U.S. dollar lower for a third straight session. The greenback was on track to post its biggest three-day loss against the yen in over a year, though analysts still believe the dollar will continue to improve in coming months.
The dollar was last down nearly 1 percent against the yen at 118.57 yen JPY=. The yen is viewed as a safe-haven currency during times when investors are more risk-averse or economic fundamentals are uncertain.
U.S. government bond yields, which move inversely to prices, were little changed after the U.S. Treasury's auction of $21 billion in reopened 10-year notes, while German government debt fell to record lows after concerns over Greece fueled safety bids.
MSCI's all-country world equity index .MIWD00000PUS, which tracks shares in 45 nations, was last down 0.81 percent at 416.82. Europe's FTSEurofirst 300 index .FTEU3closed down 0.43 percent at 1,357.21.
The Dow Jones industrial average .DJI was last down 0.82 percent at 17,654.39, while theS&P 500 .SPX was last down 0.74 percent at 2,044.6. The Nasdaq Composite .IXIC was last off 0.62 percent at 4,736.82.
Benchmark 10-year U.S. Treasury notes US10YT=RR were last up 2/32 in price to yield 2.2 percent.
Gold hovered near seven-week highs on the pullback in equity markets and the dollar. Spot gold prices XAU= were last down 0.16 percent at $1,228.40 an ounce.
(Reporting by Sam Forgione; Additional reporting by Jamie McGeever and Sudip Kar-Gupta in London and Chuck Mikolajczak and Gertrude Chavez-Dreyfuss in New York; Editing by Dan Grebler)
