* U.S. stocks down more than 1 pct
* Slim chance of Fed hike next week reduced after Brainard
* Dollar index inches up
* Oil down as IEA sees market oversupplied in first half of
(Updates with early U.S. market activity, changes dateline,
By Caroline Valetkevitch
NEW YORK, Sept 13 World stock markets and energy
prices fell on Tuesday after both energy producers and consumers
predicted an oil glut was likely to persist well into next year.
The International Energy Agency said a sharp slowdown in
global oil demand growth, coupled with ballooning inventories
and rising supply, mean the crude market will be oversupplied at
least through the first six months of 2017.
The IEA's comments follow a surprisingly bearish outlook
from the Organization of the Petroleum Exporting Countries
(OPEC) on Monday that also pointed to a larger surplus next
Financial shares fell on weakened prospects of an interest
rate hike in the near-term, adding to the early negative tone in
U.S. stocks, which were down more than 1 percent.
Volatility in stocks and other assets has picked up since
Friday as investors have weighed chances of an interest rate
hike at the Federal Reserve's Sept. 20-21 meeting.
On Monday, Fed Governor Lael Brainard, the last Fed official
to comment before the U.S. central bank's next meeting, kept to
a dovish tone on rates and urged caution about removing monetary
stimulus too quickly.
In the energy market, Brent crude was down 2.3
percent, while U.S. crude fell 3 percent.
The S&P energy index was down 2.7 percent, while the
S&P financial index was down 2 percent.
The Dow Jones industrial average was down 231.06
points, or 1.26 percent, to 18,094.01, the S&P 500 had
lost 30.89 points, or 1.43 percent, to 2,128.15 and the Nasdaq
Composite had dropped 62.71 points, or 1.2 percent, to
MSCI's all-country world stock index was
down 1 percent, while European shares . were down 0.6
Another trigger for the turmoil of the last few days was
disappointment that the European Central Bank did not signal an
extension of its bond-buying stimulus program at its meeting
That helped push up yields on government bonds in the euro
zone, many of which were negative, as well as yields in Japan,
the United States and elsewhere.
On Tuesday, the U.S. dollar recovered while U.S. Treasuries
were steady, with the yield curve holding near its steepest
levels in more than one month before the government is due to
auction $12 billion in long bonds.
Long bonds have underperformed in the past month, in line
with a steepening yield curve in Japanese government bonds, with
the Bank of Japan studying options to steepen the yield curve to
help prompt new lending by banks.
Thirty-year U.S. yields held just below
2-1/2-month highs at 2.49 percent on Tuesday. They have jumped
from 2.22 percent last Thursday.
The U.S. dollar index was up 0.3 percent.
For Reuters new Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets
(Additional reporting by Tanya Agrawal; Nigel Stephenson in
London, Shinichi Saoshiro in Tokyo, Patrick Graham, Abhinav
Ramnarayan and Sudip Kar-Gupta in London; Editing by Catherine
Evans and Nick Zieminski)