Stock markets extend losses as oil sinks below $28

World stock markets mostly fell Monday on the back of another dizzying plunge in oil prices and stubborn fears over China and the global economy.

Equities extended losses in most of Asia and Europe, with energy firms taking a hit from a fresh collapse in the cost of crude oil.

The Milan stock exchange also dived on swirling speculation over the health of several Italian banks, as did the Lisbon share market.

Wall Street was closed on Monday, a US holiday.

Global oil prices slumped beneath $28 per barrel on Monday after the lifting of sanctions against key producer Iran under its nuclear deal with world powers.

Investors also remain on edge over China's economic slowdown -- and its impact on the faltering world economy.

"European markets are doing their best to shrug off yet another negative session in Asia, as investors attempt to gauge whether or not the market has reached a good buying point," said Rebecca O'Keeffe, head of investment at stockbroker Interactive Investor.

"China, global growth and the oil market continue to cause concern and the market remains highly nervous, but at some point momentum may turn as active investors attempt to catch the bottom."

- Iran boost oil output -

Iran on Monday ordered as planned an increase in its oil production of 500,000 barrels per day.

"While the lifting of sanctions in Iran was well flagged, the prospect of additional supply from Iran has seen oil prices slide further," added O'Keeffe.

"With oil supply remaining in huge excess to demand, it is difficult to see what will cause the market to reach equilibrium so that prices can stabilise."

While the decision to free Tehran of the strict embargoes had been well telegraphed, the news hammered Middle East equities on Sunday, which were already under pressure from slumping oil.

The United States and the European Union lifted the sanctions at the weekend after the UN's atomic watchdog confirmed Iran had complied with its obligations under the deal to curb its nuclear programme.

Brent oil nosedived as low as $27.67 in earlier Asian trading hours, touching a new 12-year low before rebounding back above $29, but then slipped back again to $28.74 in the European afternoon.

- Milan stocks nosedive -

Europe's biggest stock market casualty on Monday among main exchanges was Milan, whose FTSE MIB index shed more than two percent.

Several Italian banks ran into trouble amid rumours of difficulties in negotiations over bank consolidation.

Italian lenders BMPS (Banca Monte dei Paschi di Siena), Banca Popolare dell'Emilia Romagna and UBI Banca all registered heavy losses.

Among smaller exchanges, Lisbon fell 3.4 percent, dragged down by the financial sector, but also by sharp falls in energy company BTP Mota-Engil, which has large investments in Angola, an oil producer.

Elsewhere, most Asian equities sank, with Tokyo closing down 1.1 percent near one-year lows, Hong Kong losing 1.5 percent and Sydney shedding 0.7 percent.

Shanghai however swung in and out of positive territory, having plunged almost nine percent last week. The benchmark index ended 0.4 percent higher.

The Chinese market was given some support by the People's Bank of China's decision to increase the yuan's rate against the dollar. Its recent weakness has been a key contributor to a rout in global markets that has characterised the start of 2016.

In a bid to prevent cash outflows which have also hit the yuan, the PBoC said Monday it would require foreign banks to hold reserves of the currency. Overseas lenders have until now been set a reserve requirement ratio of zero.

But from next week they will be subject to similar rules as domestic lenders, which are as high as 17.5 percent.

Markets are now nervously awaiting Tuesday's release of Chinese economic growth data for 2015.

- Key figures around 1450 GMT -

London - FTSE 100: DOWN 0.4 percent at 5,780.96 points

Frankfurt - DAX 30: DOWN 0.5 percent at 9,493.93

Paris - CAC 40: DOWN 0.4 percent at 4,193.06

Milan - FTSE MIB: DOWN 2.3 percent at 18,753.45

EURO STOXX 50: DOWN 0.7 percent at 2,933

Tokyo - Nikkei 225: DOWN 1.1 percent at 16,955.57 (close)

Shanghai - Composite: UP 0.4 percent at 2,913.84 (close)

New York - Dow: DOWN 2.4 percent at 15,988.08 (close)

Euro/dollar: DOWN at $1.0897 from $1.0916 Friday