U.S., European stocks slide as oil prices dive again

By Lewis Krauskopf

NEW YORK (Reuters) - U.S. and European stock indexes fell sharply on Tuesday and buyers sought safe-haven government bonds after another tumble in depressed oil prices.

Benchmark Brent crude settled down 4.4 percent, while U.S. crude fell 5.5 percent, settling below $30 a barrel. Hopes faded for a deal between oil-producing nations to curb a massive supply glut.

The prolonged crude slide was reflected in results from oil majors BP (NYSE: BP), whose shares slumped after it posted a $6.5 billion loss for 2015, and Exxon Mobil (NYSE: XOM), which posted its smallest quarterly profit in more than a decade.

The major U.S. stock indexes closed down about 2 percent, led lower by energy shares, while the pan-European FTSEurofirst index <.FTEU3> also dropped 2 percent.

Some investors had expressed hope recently that other markets were beginning to diverge from the performance of oil, whose slide has been viewed as a sign of shakiness in the global economy.

"We still haven't broken the correlation between oil and equities and we are yet to find a bottom in oil prices," said Jeff Carbone, co-founder of Cornerstone Financial Partners in Charlotte, North Carolina.

The Dow Jones industrial average <.DJI> fell 295.64 points, or 1.8 percent, to 16,153.54, the S&P 500 <.SPX> lost 36.35 points, or 1.87 percent, to 1,903.03 and the Nasdaq Composite <.IXIC> dropped 103.42 points, or 2.24 percent, to 4,516.95.

"With the backdrop of a pervasive nervous marketplace ... you then have the decline in oil prices, which trips off not just further concern from real-life individuals but also more importantly from the machines which trade based on headlines,” said Michael Holland, chairman of Holland & Co in New York.

The Dow Jones transportation average <.DJT> fell 2.9 percent, and hit a session low in late trading following news of the first U.S. transmission of the Zika virus.

The first results of the U.S. presidential primary season in Iowa also could be creating greater uncertainty for investors because there were no clear winners, said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.

U.S. Senator Ted Cruz of Texas edged businessman Donald Trump in the Republican race, while on the Democratic side, former Secretary of State Hillary Clinton won by a razor-thin margin against U.S. Senator Bernie Sanders of Vermont.

European equities were dragged lower by Swiss bank UBS , whose shares fell 6.8 percent after it reported a surprise outflow of funds from its flagship wealth management business.

MSCI's 46-country All World share index <.MIWD00000PUS> fell 1.7 percent.

U.S. Treasury yields fell to nine-month lows on safety buying as oil prices resumed their slide.

Benchmark 10-year notes were up 31/32 in price to yield 1.8603 percent, down from 1.966 percent late on Monday.

"The reaction in bonds is greater than you would think from the stimulus of oil and the stock market," said Lou Brien, a market strategist at DRW Trading in Chicago. "Part of it is, maybe people started leaning the wrong way last week if they thought we’d seen the bottom in crude and stocks."

Euro zone yields fell as European Central Bank chief Mario Draghi confirmed his commitment to review monetary policy next month.

The U.S. dollar index, which measures the greenback against a basket of six major currencies, fell 0.14 percent, while the euro was up 0.25 percent against the dollar.

"The risk-off bias of the marketplace ... typically favors yen and euro over the dollar," said Richard Franulovich, senior currency strategist at Westpac in New York.

(Additional reporting Karen Brettell, Caroline Valetkevitch and Sam Forgione in New York, and Tanya Agrawal in Bengaluru; Editing by Nick Zieminski and Dan Grebler)

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