European stock markets retreat as oil slides

London's benchmark FTSE 100 index closed the day down 0.6 per cent, dragged down by falls in heavyweight oil and mining share prices.

Frankfurt's DAX 30 index shed 0.4 per cent and the Paris CAC 40 lost 0.3 per cent compared with the closing levels on Tuesday.

"European stock markets are lower again as the world-wide decline in equities rumbles on," said market analyst David Madden at CMC Markets UK.

"The single currency has had a good run in the past two days on account of the solid growth numbers from Germany yesterday, and the firmer inflation report from France today," he added.

The euro built on gains won Tuesday in response to the better-than-expected German growth figures - breaking above US$1.18 to hit a near one-month high.

The pound steadied in the wake of better-than-expected UK wages growth, traders said, but remains weak on uncertainty about the political future of Britain's Prime Minister Theresa May as her government struggles on with Brexit talks.

Meanwhile, oil extended its decline after falling heavily on Tuesday on warnings of slowing demand and rising stockpiles. Other commodity prices, including those of metals, followed suit.

"Mining stocks like Rio Tinto, Glencore, Vedanta, and BHP Billiton are in the red as metals like zinc, steel and nickel are weaker as fears that China is slowing down is weighing on investor sentiment," said Madden.

"The latest, industrial production, fixed asset investment, retail sales and housing sales out of China point to an economy that is cooling."

Both Glencore and BHP Billiton ended the day down around 1.4 per cent, with shares in Rio Tinto shedding around 0.9 per cent.

Meanwhile Wall Street pushed further lower after having succumbed to profit-taking on Tuesday, with the Dow down 0.3 per cent nearing midday.

"US stocks are noticeably lower in early action, with weakness in Asia and Europe remaining, as a flare-up in global de-risking appears to be continuing," said analysts at Charles Schwab brokerage.

"US tax reform uncertainty is persisting and pressure on commodity issues continues as Chinese economic data has disappointed and crude oil prices continue to fall," they added.

Investors are concerned about US President Donald Trump's planned tax cuts as Republican lawmakers struggle to agree a deal.

OIL SELL-OFF

Both main oil contracts were down around half a per cent on Wednesday, a day after the International Energy Agency cut its forecast for world crude consumption, saying recovering prices and a mild early northern hemisphere winter weighed on purchases.

The news comes after recent gains in crude fuelled by a production cut by the OPEC cartel and a brewing crisis in the Middle East between Saudi Arabia and Iran.

"The long-awaited short-term correction in oil prices finally occurred overnight," said Oanda market analyst Jeffrey Halley.

The latest losses in oil prices followed a drop of 1.9 per cent in the value of the main US contract and 1.5 per cent decline for Brent North Sea crude on Tuesday.

The oil sell-off filtered through to stocks in general, while indices have been on a broad decline since hitting multi-year highs last week.

Key figures around 1630 GMT:

New York - DOW: DOWN 0.3 per cent at 23,331.11
London - FTSE 100: DOWN 0.6 per cent at 7,372.61 points (close)
Frankfurt - DAX 30: DOWN 0.4 per cent at 12,963.09 (close)
Paris - CAC 40: DOWN 0.3 per cent at 5,301.25 (close)
EURO STOXX 50: DOWN 0.2 per cent at 3,549.55

Tokyo - Nikkei 225: DOWN 1.6 per cent at 22,028.32 (close)
Hong Kong - Hang Seng: DOWN 1.0 per cent at 28,851.69 (close)
Shanghai - Composite: DOWN 0.8 per cent at 3,402.52 (close)

Euro/dollar: UP at US$1.1795 from US$1.1792 at 2145 GMT
Dollar/yen: DOWN at 113.13 yen from 113.43 yen
Pound/dollar: DOWN at US$1.3363 from US$1.3166

Oil - Brent North Sea: DOWN 26 cents at US$61.95 per barrel
Oil - West Texas Intermediate: DOWN 40 cents at US$55.30