NEW YORK (Reuters) - Global equity markets staged a late rebound along with oil prices on Wednesday to cut declines from 2-1/2 year lows, but remained on pace for one of the most dismal monthly performances on record.

Oil prices tumbled once again after the International Energy Agency warned Tuesday the market could “drown in oversupply” and on concerns about the impact of a slowing China on global economic growth. The rout in oil prices has prompted spending cuts and layoffs in the energy sector and sparked concerns about the impact of energy loans on the banking sector.

Indexes managed to rebound from steep losses, however, as new front month March futures CLc2 and Brent LCOc1 pared declines.

“If you look at crude prices, they are shooting right back up, so I would say you can blame whatever is in equities to crude because they are incredibly highly correlated,” said Randy Frederick, managing director of trading and derivatives for Charles Schwab in Austin.

“There is no doubt that is why equities are going up.”

Wall Street ended with declines of more than 1 percent after tumbling more than 3 percent during the trading session. Healthcare .SPXHC was the only one of the 10 major sectors in positive territory while the energy sector .SPNY cut losses in half to finish down 2.9 percent.

The Dow Jones industrial average .DJI fell 249.28 points, or 1.56 percent, to 15,766.74, the S&P 500 .SPX lost 22 points, or 1.17 percent, to 1,859.33 and the Nasdaq Composite .IXIC dropped 5.26 points, or 0.12 percent, to 4,471.69.

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The MSCI World equity index .MIWD00000PUS lost 2 percent after falling as much as 3.4 percent its lowest level since June 2013. The index has already dropped 10.5 percent in January, which if sustained would be the worst monthly loss since October 2008, the month after Lehman Brothers went bankrupt.

There have been steeper monthly drops only five times in the MSCI World index’s 28-year history, two of which occurred during the financial crisis in 2008.

U.S. crude plunged to a low of $26.19, its lowest since May 2003. WTI CLc1 for February delivery, which expired at the end of the day, settled down 6.7 percent to $26.55 while Brent crude lost 3.1 percent, to $27.88.

European shares closed at their lowest level since October 2014, with the FTSEurofirst 300 .FTEU3 down 3.3 percent, to notch its biggest single-session decline in six weeks.

France's CAC .FCHI and Britain's FTSE .FTSE both tumbled more than 3 percent for their worst session declines of the year and Germany's DAX .GDAXI lost 2.8, for its worst daily drop since the first trading day of 2016. The decline confirmed a bear market for the FTSE, down 20.1 percent from its closing high in April.

Oil shares in Europe .SXEP are down more than 14 percent already this year and at their lowest levels since March 2003. That has been a major weight on the FTSEurofirst 300, which is down nearly 12 percent in 2016 and more than 23 percent from its high in April.

The safe-haven yen JPY= climbed as risk appetite soured, dragging the dollar to a one-year low, as investors trimmed the chances of more tightening by the Federal Reserve. The U.S. currency was down 0.6 percent at 116.88 yen after hitting a session low of 115.96 yen.

While the dollar fell against the yen, it was strong against emerging market currencies, compounding the misery for many countries already suffering from low oil prices.

Demand for U.S. bonds, another asset sought in times of uncertainty, was high, with yields on benchmark 10-year Treasury notes US10YT=RR down to 1.9911 percent, after falling as low as 1.939 percent, up 13/32 in price.