Brent crude oil extended a slide on Monday to its lowest level in more than 11 years while investors dumped Spanish bonds and stocks after an inconclusive general election set the scene for potentially weeks of political stalemate.

Spain’s Ibex share index slid to a near three-month low but European stocks overall moved higher in early trade, taking their cue instead from equity gains in Asia.

Brent fell 2 per cent to a low of $36.06 a barrel, its lowest since July 2004. It has lost a fifth of its value in the last month and a third since early October.

“What is pushing the price lower is nothing new. It’s all about the same ingredients: oversupply and weak consumption,’’ said Naeem Islam, chief market analyst at AvaTrade.

Crude’s persistent weakness has exerted heavy downward pressure on oil exporting countries’ currencies, foreign exchange reserves and government budgets.

The latest to feel the heat was Azerbaijan, which on Monday floated its currency, the manat. The currency plunged 48 per cent to 1.55 per dollar.

Europe’s FTSEuroFirst index of leading 300 shares was up 0.7 per cent at 1,429 points, with Germany's DAX up 1.6 per cent and Britain’s FTSE 100 and France’s CAC40 both up 0.8 per cent.

Earlier in Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan rose 0.3 per cent, as investors bid up modestly priced Chinese blue-chips. China’s CSI300 index surged 2.6 per cent, but Japan’s Nikkei 225 fell 0.4 per cent.

Spain lags

Spain’s IBEX, however, was down 2.2 per cent, hitting its lowest since September 29 after the fragmented nature of Sunday’s election vote cast uncertainty over the country’s reform programme and broader economy.

Prime Minister Mariano Rajoy’s conservative Popular Party won more seats than any other party but fell well short of a majority. Left-wing parties failed to win a clear mandate to govern either, and talks to form a coalition government could drag on for weeks.

“A centre-right coalition cannot reach a majority... (and this) injects even greater political uncertainty. This is unlikely to be a positive development for markets,’’ Marco Stringa, senior economist at Deutsche Bank, said in a note.

“Overall the main risk remains political impasse due to the unprecedentedly fragmented parliament.’’

Spain’s 10-year government bond yield rose almost 20 basis points to 1.89 per cent, its highest in over a month. The spread over the benchmark German 10-year Bund yield widened to 130 basis points, also the highest in over a month.

In currency markets, the dollar inched higher in light trade to 98.775 against a basket of currencies, and the euro slipped 0.1 per cent to $1.0850. The dollar rose 0.2 per cent against the yen to 121.42 yen.

US stock futures pointed to a rise of around 1 per cent at the open on Wall Street, rebounding from a volatile end to last week with the expiration of stock and index options contracts generating heavy trading volume.

The Dow ended Friday down 2.1 per cent, while the S&P 500 lost 1.78 per cent and the Nasdaq 1.59 per cent. All three fell on the week.

Monday’s expected recovery on Wall Street put Treasuries under pressure.

Longer-dated Treasuries have been particularly popular as investors wager the Federal Reserve is well ahead of the curve on inflation after last week’s rate hike. But on Monday the 10-year yield was up 2 basis points.

That steepened the yield curve. The gap between two-year and 10-year paper had shrunk to 122 basis points last week, the smallest since early February, but on Monday was back out to around 125 bps.

A flatter curve is often an indication that economic growth is slowing, as investors price in the tightening effects of higher short-term rates on longer-term activity and inflation.

Gold continued to recoup some of last week's initial slide following the first US interest rate hike since 2006. It was up 0.6 per cent at $1,072 an ounce, building on the 1.4 per cent gain of the previous session.

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