Wall Street drops with oil near seven-year low; Europe stocks up

By Sam Forgione

NEW YORK (Reuters) - Oil prices skidded to their lowest level in nearly seven years on Monday, hurting the shares of major oil companies on Wall Street as a global glut showed no signs of abating, while European stocks benefited from a weaker euro.

Brent crude prices fell to $41.20, their lowest since February 2009, after a meeting of members of the Organization of the Petroleum Exporting Countries Friday ended in disagreement over production cuts and without a reference to its output ceiling.

Oil majors Exxon , down 3 percent, and Chevron , which fell 2.9 percent, were the biggest drags on the U.S. Dow and benchmark S&P 500 indexes. Increased strength in the dollar for a second straight session made it more expensive to hold crude positions.

 

Brent crude was last down $2.26, or 5.3 percent, at $40.74 a barrel, while U.S. crude was last down $2.12, or 4.9 percent, at $40.88 per barrel.

"As a result of the collapse in oil and gas prices today, the market is worried that you're going to see less capital spending, you're losing a lot of a good-wage jobs in the oil patch, and people are worrying that we're going to see a snowball of defaults among high-yield energy issuers," said Scott Wren, senior global equity strategist at Wells Fargo Investment Institute in St. Louis.

A weaker euro helped boost European shares, which rose from three-week lows hit last week when the European Central Bank disappointed investors with its latest stimulus package. A weaker euro helps stocks by making European exports cheaper relative to competing imports.

An outlier among European stocks was Electrolux , which sank over 13 percent after its deal to buy General Electric's appliance business fell through.

MSCI's all-country world equity index <.MIWD00000PUS>, which tracks shares in 45 nations, was last down 0.7 percent.

The Dow Jones industrial average <.DJI> fell 0.83 percent at 17,698.75. The S&P 500 <.SPX> was down 0.89 percent, at 2,073.10. The Nasdaq Composite <.IXIC> was off 0.89 percent, at 5,096.62.

Europe's broad FTSEurofirst 300 index <.FTEU3> added 0.45 percent, and was last at 1,464.4. The euro > was last down 0.32 percent, at $1.0856.

The dollar rose on expectations the U.S. Federal Reserve is on track to raise interest rates next week in the wake of a solid November jobs report. The dollar index <.DXY>, which tracks the greenback against a basket of six major currencies, rose 0.28 percent, to 98.62.

"It's pretty much a done deal they will move," Charles St-Arnaud, currency strategist at Nomura Securities International in New York said of the Fed, which meets on monetary policy on Dec. 15-16.

U.S. Treasury debt prices rallied as investors consolidated positions in a week that is generally thin on economic data after last Friday's stronger-than-expected U.S. November jobs report.

Benchmark 10-year Treasury notes > were last up 14/32 in price to yield 2.21 percent, from a yield of 2.28 percent late Friday.

Spot gold prices > fell from a three-week high and were last down $7.40, or 0.7 percent, at $1,077.1 an ounce after the gains in the dollar.

(Additional reporting by Tanya Agrawal and Richard Leong and Gertrude Chavez-Dreyfuss in New York; Editing by Nick Zieminski)