Oil industry stocks tumbled Monday, dragging down British and US markets, as crude prices sank to their lowest close since February 2009 in the wake of last week's OPEC decision.
Leading petroleum stocks such as US giant ExxonMobil, France's Total and Italy's Eni all fell between two and three percent, with many smaller producers and oil-services companies suffering even bigger drops.
The big pullback in petroleum-linked stocks came after Friday's decision by the Organization of the Petroleum Exporting Countries not to cut output dimmed the odds of any quick recovery in oil prices as analysts focused on a rift within the cartel.
The cartel, which is currently producing well above its prior limit, did not set a new production ceiling on Friday and said in a communique that members "should continue to closely monitor developments in the coming months."
"No result is also a result, and in the case of OPEC it is hard to imagine a more negative one," said a note from Commerzbank.
"If in a critical situation OPEC cannot even agree on a lowest common denominator such as an official production limit, it is permissible to question its right to exist. In any case, the oil price looks likely to find virtually no support from OPEC in the coming months."
The broad-based S&P 500 dropped 0.7 percent, while the FTSE 100 in London ended down 0.2 percent.
But the retreat in oil prices lifted airline shares, with US carriers American Airlines, Delta Air Lines and United Airlines; Britain's easyJet and Germany's Lufthansa all rising.
The DAX 30 climbed 1.3 percent in Frankfurt while the CAC 40 in Paris added 0.9 percent.
Some analysts said the strength in Paris and Frankfurt showed markets had oversold last week's European Central Bank policy decision, which resulted in a stimulus package that fell short of market expectations.
In foreign exchange activity, the euro slid against the dollar, giving back some of the gains spurred by investor disappointment in Thursday's ECB decision.
One of the biggest movers in European trading was Electrolux, which tumbled 13.5 percent in Stockholm, after US conglomerate General Electric abandoned a plan to sell the Swedish company its appliance business for $3.3 billion following opposition from US antitrust regulators.
"It's back to square one for Electrolux in North America. This is a deal that would have made them much stronger in the US especially against Samsung and LG," two South Korean competitors, said Karri Rinta, an analyst with Handelsbanken Capital Markets.
GE, which said it is entitled to a $175 million break-up fee from Electrolux, dropped 0.4 percent.
Regulatory risk concerns also hit Office Depot and Staples, which announced plans to combine in February.
Office Depot plummeted 15.8 percent and Staples 13.8 percent after the US Federal Trade Commission challenged their $6.3 billion merger, arguing the combination would harm the business-to-business market for office supplies and services. The companies said the FTC's case misreads the competitive market.
Deutsche Bank reduced its price targets on both stocks.
"We acknowledge that there is still the possibility that a deal occurs as Staples and Office Depot are challenging the FTC decision," the bank said in a note.
"But, the potential of the deal occurring is greatly reduced in our view, necessitating our changes." (AFP)
