* S&P 500 ends nearly 1.5 pct lower
* Chance of Fed hike next week diminished
* Long-dated U.S. bond yields hit highest in 3 months
* Oil down as IEA sees market oversupplied in first half of
(Updates with closing levels for U.S. markets)
By Caroline Valetkevitch
NEW YORK, Sept 13 World stock markets and energy
prices fell on Tuesday after energy consumers and producers
both predicted an oil glut was likely to persist well into next
Long-dated U.S. bond yields rose to their highest levels in
about three months, while the U.S. dollar edged up.
The International Energy Agency said a sharp slowdown in
global oil demand growth, coupled with increasing inventories
and rising supply, mean the market will be oversupplied at least
through the first six months of 2017.
The IEA's comments followed a surprisingly bearish outlook
from the Organization of the Petroleum Exporting Countries on
Monday that also pointed to a larger surplus next year.
U.S. financial shares fell on weakened prospects of an
interest rate hike in the near-term, adding to the negative tone
in U.S. stocks, which ended more than 1 percent lower.
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.
Three Fed officials on Monday took a dovish stance on
interest rates, in contrast to more aggressive comments from
other officials in the past two weeks.
"You had this absolute rush of speakers and so many
different points of view ... It certainly muddied the waters to
a degree," said Jim Tierney, CIO of U.S. Concentrated Growth at
AllianceBernstein in New York.
Brent crude dropped $1.22, or 2.5 percent, to settle
at $47.10 a barrel, while U.S. crude fell $1.39, or 3
percent, to settle at $44.90.
The S&P 500 energy index was down 2.9 percent,
leading sector declines, while the S&P financial index
fell 1.8 percent.
The Dow Jones industrial average lost 258.32 points,
or 1.41 percent, to 18,066.75, the S&P 500 dropped 32.02
points, or 1.48 percent, to 2,127.02 and the Nasdaq Composite
fell 56.63 points, or 1.09 percent, to 5,155.26.
MSCI's all-country world stock index was
down 1.1 percent, while European shares closed off 1
percent, marking their fourth down day.
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 boost 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, long-dated U.S. Treasury yields rose to their
highest levels in about three months on heavy Treasury and
corporate debt supply and on concerns about global central bank
policy. The Treasury Department saw weak demand for a $12
billion sale of 30-year bonds.
The yield curve also steepened on reports the Bank of Japan
plans to make negative interest rates a centerpiece of its
future easing program.
Long bonds have underperformed in the past month, in line
with a steepening yield curve in Japanese government bonds.
Benchmark 10-year notes fell 18/32 in price to
yield 1.73 percent, after rising as high as 1.752 percent, the
highest since June 3.
The U.S. dollar received a boost from the reports on the
BOJ. The dollar was last up 0.79 percent against the yen at
The move "could be reflecting some dovish expectations ahead
of the Bank of Japan meeting next week," said Eric Viloria,
currency strategist at Wells Fargo Securities in New York.
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 Chuck Mikolajczak, Sam Forgione and
Karen Brettell in New York, and Nigel Stephenson in London,;
Editing by Nick Zieminski and Dan Grebler)