Oil slump rocks European stocks to lowest level

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.

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.

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.

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.

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.

“I do see a bear market coming. I am quite pessimistic about the equity markets for the next two to three months. I do not see a 2008-style scenario,” reported hedge fund trader and principal at ACIES Asset Management Andreas Clenow.

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.

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 quite clearly being driven by declining risk appetite, higher market volatility and lower commodity prices… This is a different kind of dollar strength altogether,” claimed Aroop Chatterjee, a director of research at Barclays in London.

“ The emerging markets 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.

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 revealed 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.