(MENAFN- AFP) European stock markets fell on Tuesday as traders reacted to further declines in oil prices and political turmoil in Greece which pushed the euro to a 29-month low.
Crude futures hit the lowest levels for five-and-a-half years, while the euro struck $1.2124, its lowest point since July 2012, before rebounding.
London's benchmark FTSE 100 index shed 1.07 percent to stand at 6,562.78 points in afternoon deals, as heavyweight energy companies retreated on sliding oil prices.
On its last trading day of the year, Frankfurt's DAX 30 shed 1.22 percent to close at 9,805.55 points. It rose by a modest 2.65 percent over the year as weak eurozone growth weighed on Germany, Europe's biggest economy.
Markets have been hit also by weaker growth in China that has offset stronger expansion in the United States.
The CAC 40 in Paris dropped 1.13 percent to 4,269.10 points in mid-afternoon deals compared to Monday's close.
Wall Street followed the slumping European equity markets with Greece's political uncertainty also weighing on US stocks which opened slightly lower.
Five minutes into trade, the Dow Jones Industrial Average stood at 18,008.31, down 0.17 percent.
The broad-based S&P 500 fell 0.20 percent to 2,086.37 while the tech-rich Nasdaq Composite Index dipped 0.16 percent to 4,799.00.
"Oil's latest plummet joined yesterday's Greek failure," said Connor Campbell, analyst at Spreadex trading group.
"The energy-heavy FTSE didn't have much hope for a strong start to Tuesday, with the record low oil prices," he added.
Shares in Royal Dutch Shell slid 2.72 percent, BP gave up 1.66 percent, while Total retreated 2.25 percent in Paris trade.
Crude oil prices struck low points on Tuesday, as analysts predict rising US production despite a global supply glut.
New York's West Texas Intermediate (WTI) dropped to $52.70 a barrel -- the lowest level since May 2009.
Brent North Sea crude slid to $56.74, also a five and a half year low.
WTI for delivery in February later recovered to $53.31 a barrel, down 30 cents from Monday's close.
Brent recovered to $57.54, but still down 34 cents from Monday.
"Oil prices have once again touched new lows over longer term concerns about US production levels," Michael McCarthy, chief market strategist at CMC Markets in Sydney, told AFP.
Oil has shed about half its value since June, attributed to slowing growth in China and emerging-market economies, a recession in Japan and a near-stall in the eurozone.
On top of that, the OPEC oil-producing cartel last month said it would maintain output levels despite ample global supplies, in part due to cheaper oil extracted from North American shale rock.
Analysts said traders were also girding for more downward pressure stirred up by the impact of a brewing Greek political crisis, expected poor numbers on China's industrial sector, and another possible increase in US stockpiles.
- Greece watch -
Greece's Prime Minister Antonio Samaras on Tuesday said a snap election planned for next month would determine whether the country remains in the eurozone.
"This struggle will determine whether Greece stays in Europe," Samaras said, as he asked the president to dissolve parliament ahead of an election set for January 25.
There are fears that the anti-austerity, far-left Syriza party could win and roll back measures required under the IMF-EU bailout of the country, in turn further weakening the eurozone economy.
The events in Greece raise concerns of a return to the crisis of 2010 when the country, unable to service its debts and facing an exit from the eurozone, was forced into taking handouts from the IMF and European Union.
"For now the situation is more a political crisis than a financial one, but the reignition of the eurozone problem is certainly an unwelcome development after a year in which many thought the crisis had left us for good," said David Madden, market analyst at IG traders.
After striking its lowest level for around two and a half years, the euro recovered to trade at $1.2163, which compared with $1.2153 late in New York on Monday.
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