Global stocks lower on renewed worries about banking sector

SEOUL, South Korea – Global stock markets were sharply lower Friday as investor sentiment was dented by renewed worries about the financial health of Deutsche Bank following reports that some hedge funds were moving their businesses out of Germany’s biggest bank.

KEEPING SCORE: European stocks started lower. Britain’s FTSE 100 fell 1.1 per cent to 6,847.05 while France’s CAC 40 sank 1.7 per cent to 4,366.89. Germany’s DAX lost 1.6 per cent to 10,243.71. Futures augured a tepid start on Wall Street. S&P futures and Dow futures both lost 0.2 per cent.

ANALYST’S TAKE: “Risk sentiment waned overnight as worries about global banks weighed on markets,” said Alex Wijaya, senior sales trader at CMC Markets in Singapore. “Stock markets worldwide are rattled by the latest development at Deutsche Bank.”

BANK WOES: Shares of Deutsche Bank nosedived to below 10 euros a share for the first time after reports said some hedge funds have taken measures to reduce risks associated with the German bank. The company has been a source of concerns for investors for weeks since U.S. authorities disclosed that they are seeking $14 billion from the bank to settle legal claims over its sales of mortgage securities in 2007 and 2008. The bank said it had struck a deal to sell a subsidiary and stressed that it was not seeking government help, but investors are worried about what will happen to Germany’s biggest lender and to the broader financial system if Deutsche Bank runs low on capital. Analysts said the bank’s troubles are raising scrutiny over other banks in Europe, which are also in talks regarding mortgage settlements with U.S. authorities.

CHINA OUTPUT: The Caixin monthly purchasing managers’ index, which is closely watched for insights into China’s economy, ticked up to 50.1 for September from the previous month’s 50.0 reading. The tiny expansion in activity and gains in overall new orders for the third straight month offered a glimmer of hope for the world’s second-largest economy that has been grappling with a prolonged slowdown. But the private survey result was not strong enough to relieve investors outside China.

ASIA’S DAY: Japan’s Nikkei 225 slumped 1.5 per cent to 16,449.84 and South Korea’s Kospi fell 1.2 per cent to 2,043.63. Hong Kong’s Hang Seng index sank 1.9 per cent to 23,297.15. Australia’s S&P/ASX 200 dropped 0.7 per cent to 5,435.90. China’s Shanghai Composite Index was up 0.2 per cent to 3,004.70. Stocks in Singapore and other Southeast Asian countries were lower.

OIL: Benchmark U.S. crude lost 54 cents to $47.29 per barrel in New York. The contract gained 78 cents, or 1.7 per cent, to close at $47.83 a barrel on Thursday. Oil prices surged earlier this week after the nations of OPEC, which collectively produce more than third of the world’s oil, agreed to a small cut in production in a surprise decision. Brent crude, the international benchmark, fell 61 cents to $49.20 a barrel in London.

CURRENCIES: The dollar fell to 101.03 yen from 101.16 yen while the euro weakened to $1.118 from $1.122.