By Sam Forgione
NEW YORK (Reuters) - Equity markets worldwide tumbled on Monday, led by commodity-linked shares as oil prices fell to 5-1/2-year lows and investors fled to the safety of government bonds.
Crude oil futures and U.S. crude prices dropped to their lowest levels since spring 2009, hit by a global supply glut and lackluster demand. Strength in the U.S. dollar, which touched a near nine-year high against the euro on the EBS platform, weighed on dollar-denominated commodities.
Data showed Russia's oil output hit a post-Soviet high last year, while Iraq's oil ministry said the country's oil exports in December were the highest since 1980, underscoring excess supply. Brent crude for February fell to as low as $52.66 per barrel, while U.S. crude dipped below $50 to a low of $49.95 per barrel. It was lately trading at $50.60 a barrel.
The S&P 500 energy sector was last down 4.2 percent after falling almost 20 percent over the last two quarters of 2014. European oil and gas and basic resources indexes closed down 4.9 percent and 3.6 percent, respectively.
The decline in U.S. stocks is "driven quite a bit by the slump in energy prices," said Rick Meckler, president of LibertyView Capital Management in Jersey City, New Jersey.
"You also have a very strong dollar," he said. "Multinationals will have their earnings decreased if they aren't fully hedged."
Political uncertainty in Greece, which has renewed fears of a possible Greek exit from the euro zone, also rattled European stocks ahead of the country's elections later this month.
The U.S. dollar index, which measures the greenback against a basket of six major currencies, hit a nine-year high of 91.775. The euro fell to a near nine-year low against the dollar of $1.18605 on the EBS platform, tumbling on the worries over Greece.
Weaker oil prices and the stronger dollar weighed on emerging markets shares, which hit more than two-week lows. Chinese shares were the exception, reaching a five-year closing high.
The concerns about Greece and Europe's economy helped push long-dated U.S. government bond yields to their lowest levels since August 2012. The yield on the 30-year U.S. Treasury bond was last at 2.62 percent after touching a low of 2.604 percent. German 10-year Bund yields hit a record low of 0.492 percent.
MSCI's all-country world index was last down 1.8 percent at 408.28. Europe's broad FTSEurofirst 300 index closed down 2.25 percent at 1,332.47. The euro zone's blue-chip Euro STOXX 50 fell 3.7 percent, the biggest one-day percentage drop since late 2011.
The Dow Jones industrial average was down 294.25 points, or 1.65 percent, at 17,538.74. The Standard & Poor's 500 Index was down 34.23 points, or 1.66 percent, at 2,023.97. The Nasdaq Composite Index was down 64.98 points, or 1.37 percent, at 4,661.83.
Brent crude was last down $2.79 at $53.63 a barrel. The dollar index was up 0.44 percent at 91.479. Spot gold prices rose $13.32 to $1,202.20 an ounce.
(Reporting by Sam Forgione; Additional reporting by Rodrigo Campos and Michael Connor in New York and Atul Prakash and Christopher Johnson in London; Editing by Leslie Adler and Dan Grebler)
