* US crude oil falls under $28 a barrel, lowest since 2003
* European stock markets slump in biggest fall of 2016
* Risk aversion sends yen to highest vs dollar in a year
* Emerging markets sell-off, rouble on the brink
By Alistair Smout
LONDON, Jan 20 (Reuters) - European shares slid to their lowest since October 2014 on Wednesday following losses in U.S and Asian stock markets as the relentless slump in oil prices continued to drag on risk assets.
The FTSEurofirst 300 .FTEU3 fell 3.3 percent, set for its biggest single session loss of an already turbulent 2016 and breaking through the December 2014 low which had been its recent trough.
Germany's DAX .GDAXI , France's CAC .FCHI and Britain's FTSE .FTSE were all down around 3 percent and also set for their biggest fall of the year so far.
U.S. crude wallowed at its lowest since 2003 after the world's energy watchdog warned the market could "drown in oversupply". U.S. futures CLc1 shed 3.6 percent to $27.43 while Brent crude LCOc1 lost 3.1 percent to $27.87 a barrel.
Copper also slipped. Basic resources .SXPP and energy sector .SXEP were the sectors that fell most steeply in Europe, down 4.8 and 3.8 percent respectively.
Oil shares in Europe are down 13 percent already this year, also at their lowest levels since 2003. That has been a major weight on the FTSEurofirst 300, which is down more than 10 percent in 2016, which investors see as "correction" territory.
"I am quite pessimistic about the equity markets for the next two to three months. I do not see a 2008-style scenario, but I do see a bear market coming," said Andreas Clenow, hedge fund trader and principal at ACIES Asset Management, suggesting a further 10 percent fall to come.
Wall Street had seen its early gains on Tuesday erased by the tumble in U.S. crude. U.S. stock futures ESc1 were down 2.1 percent on Wednesday, indicating a weak start.
Risk aversion boosted appetite for the yen, a traditional safe-haven, which rose more than 1 percent against the dollar JPY= to its highest level in a year, while sterling hit its lowest since early 2014 GBPJPY= . for German Bunds, another safe-haven asset, was also high, and the 10-year Bund yield fell to its lowest level in more than eight months ahead of a European Central Bank policy meeting on Thursday. the dollar fell against the yen, it was strong against emerging markets, compounding the misery for many countries already suffering from low oil prices.
Top emerging market shares .MSCIEF fell 2.9 percent to a 6-1/2 year low, while EM currencies were crushed. Russia's rouble RUBUTSTN=MCX teetered on the brink of a record low of 80.10 to the dollar.
"This is a different kind of dollar strength altogether ... this is quite clearly being driven by declining risk appetite, higher market volatility and lower commodity prices," said Aroop Chatterjee, a director of research at Barclays (L:BARC) in London.
"In this new world emerging markets are the ones that bear the brunt of the dollar strength."
In Asia, stocks surrendered all of Tuesday's rare gains with MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS falling 3 percent on the day and hitting its lowest since October 2011.
The Hong Kong stock market's benchmark index .HSI posted its single biggest daily fall since early August, while Japan's Nikkei .N225 closed down 3.7 percent. It is now 20 percent below last year's peak, meeting the technical definition of a bear market.
Chinese markets fared only marginally better amid mounting talk that more stimulus may be on the way, possibly before the Lunar New Year holidays in early February. A report in the government-backed China Securities Journal said Beijing had the policy space for further easing to support the economy.
The CSI300 index .CSI300 fell 1.5 percent, after rallying more than 3 percent on Tuesday. The Shanghai Composite Index .SSEC eased 1 percent.
China's central bank meanwhile revealed late on Tuesday that it would inject more than 600 billion yuan ($91.22 billion) into the banking system to help ease a liquidity squeeze expected before the long Lunar New Year celebrations. a move is usual before the holidays, however, and stopped well short of an actual cut in bank reserve ratios.