US, European stocks weighed down by banking woes

Deutsche Bank slumps on news of a record fine; Wells Fargo drops 1.6% amid House probe

Gulf News

New York: US and European stock markets retreated on Friday, as banking shares led by Deutsche Bank slumped on news that US authorities were hunting down Germany’s biggest lender over a record fine.

Frankfurt’s DAX 30 was the hardest hit, closing down 1.5 per cent, while the Paris CAC 40 shed nearly 1.0 per cent from Thursday.

London’s benchmark FTSE 100 index lost 0.3 per cent, while the S&P 500 in the US shed 0.4 per cent.

The US Justice Department is seeking up to $14 billion (Dh51.4 billion) from Deutsche Bank to resolve allegations stemming from the sale of mortgage securities in the 2008 crisis, the German financial giant confirmed.

It added that the DoJ had invited the bank to submit a counter offer, and said it expected to reach a “materially lower” figure in negotiations.

But the news hammered Deutsche Bank shares, which sank 8.5 per cent to close at 11.99 euros in Frankfurt.

The US action was also felt across Europe’s banking sector, with shares in Royal Bank of Scotland in London shedding 4.4 per cent, and in Paris, French lender Societe Generale slid 2.7 per cent.

The Deutsche enforcement comes as European banks already faced a tough profit outlook due to ultra-low and negative interest rates.

Banking shares were also among the weak points on Wall Street. Wells Fargo dropped 1.6 per cent after the House Financial Services Committee became the latest entity to announce an investigation into allegations that the huge US bank fraudulently opened millions of unauthorised customer accounts. The panel plans hearings this month.

Citigroup lost 1.4 per cent following a downgrade by Goldman Sachs.

Asian stock markets meanwhile rallied Friday on doused expectations of a Federal Reserve interest rate hike next week after another round of below-par US data.

Equities globally have suffered during a volatile week as top Fed officials gave conflicting views on the need for tighter monetary policy, fuelling uncertainty across trading floors.

But the chances of a move at the Fed policy meeting have fallen late this week with lacklustre US data on retail sales and consumer prices.

In Asia, where trade was thin due to public holidays, Tokyo ended 0.7 per cent higher, while Sydney jumped one per cent, Singapore also added 0.7 per cent and Wellington climbed 0.8 per cent.

Shanghai, Hong Kong, Seoul, Kuala Lumpur and Taipei were shut.

“With nothing in the economic numbers to say US rates should be moving up, and growing signs of losing momentum, expectations have largely diminished toward the Fed doing anything in September,” said ANZ Bank New Zealand chief economist Cameron Bagrie.

“The market is drifting back toward the view they might do nothing for quite a while,” he wrote in a note.

Also on traders’ radar next week will be the Bank of Japan’s own policy meeting amid reports that it is planning to cut interest rates further into negative territory.