wednesday, september 28, 2016 europe’s bank angst sours...

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LONDON: Worries about Europe’s banks wrenched stocks into reverse yesterday and halted a surge in Mexico’s peso that followed Democrat Hillary Clinton’s victory over Republican Donald Trump in the first US presi- dential debate. Europe’s mood soured as Deutsche Bank shares hit another record low on nagging worries about the lender’s health and left Wall Street futures pricing in barely a rise for the S&P 500 and Dow Jones Industrial. Trading was still expected to still be frenetic after a marathon TV debate between Trump and Clinton on Monday evening that was esti- mated to have pulled in nearly 100 million viewers. Markets have tended to see Clinton as the candidate of the status quo, while few are sure what a Trump presidency might mean for US foreign policy, international trade deals or the domestic economy. Snap polls after the debate suggested Clinton had bolstered her chances of winning November’s election. She accused Republican Trump of racism, sexism and tax avoidance while the real estate tycoon, making his first run for public office, said Clinton’s long years of service represented “bad experience”. For markets the clear victor was the Mexican peso, which surged as much as 2.3 percent after hitting an all-time lows on fears that a Trump presidency would threaten Mexico’s exports to the United States, its single biggest market. Those gains had been pruned to just over 1.6 percent before the start of US and Mexican trading although the currency didn’t look keen to give back much more. “The Mexican peso has become the main market proxy for Trump on-Trump off,” said Saxo Bank’s head of FX strategy John Hardy, pointing to its near 9 percent fall versus the dollar this year. “It was probably becoming a bit too cheap ... but as long as you don’t know the result of US election that proxy (US election) risk is proba- bly going to stay.” Deutsche Bank wasn’t the only European banks in the firing line. Shares in UK-based Standard Chartered fell 2.5 percent on reports that it was facing a US probe over an Indonesian investment. Europe was also digesting news that a referendum over Italian Prime Minister Matteo Renzi’s flagship constitutional reform will be held on Dec 4, with the fate of his administration likely to hinge on the outcome. It was one of the latest dates he could have picked and gives him maxi- mum time to try and turn around what at present looks like a defeat. That offered investors some comfort and Italian bond yields fell to a 2-1/2-week low. “It is being kicked down the road quite a bit, this can,” said Rabobank’s head of macro strategy research Elwin de Groot. “He is trying to buy time but that could also be a risk. He is banking that he will win back a bit of public support but there is the possibility that he might not.” OIL PRESSURE There was mixed news from the European Central Bank as data showed loans to eurozone businesses dipped slightly in August despite its massive stim- ulus program. The euro fell for the first time in five days, slipping 0.25 percent to $1.1225 and to 1.1563 per pound. Oil mar- kets were also in flux as the world’s largest producers gathered in Algeria to discuss ways to tackle a crude glut that has bat- tered prices for two years now. A source from Iran, where production is on the comeback after years of international sanc- tions, told Reuters it wanted 12.7 percent of any new OPEC output ceiling to help it reclaim its market share. Saudi Arabia has suggested it would need Iran to freeze its production for it to do the same. In Asia, MSCI’s broadest index of Asia- Pacific shares outside Japan had recouped early losses to rise 0.6 percent and Japan’s Nikkei swung 0.8 percent higher, having been down 1.5 percent at one stage. The US dollar rebounded as high as 100.83 yen from a one-month low around 100.08 though it was fading again in the first flur- ry of New York trading as European bank- ing sector strains returned. Hong Kong’s Hang Seng index advanced 1.1 percent to 23,571.79 and Tokyo’s Nikkei 225 was up 0.6 percent at 16,635.29. The Shanghai Composite Index was unchanged at 2,969.14. Seoul’s Kospi added 0.9 percent to 2,017.94 and Sydney’s S&P-ASX 200 rose 0.4 percent to 5,497.40. India’s Sensex gained 0.2 percent to 28,342.26 and benchmarks in New Zealand and Thailand advanced. Other Southeast Asian markets declined. The yen’s safe-haven counterparts were reclaiming ground too. Yields on US 10- year Treasuries, which move inversely to prices, dropped to a three-week low of 1.54 percent, from 1.60 percent overnight. German two-year yields hit a record low as Finland became the third eurozone coun- try after Germany and the Netherlands to see its 10-year yields drop below zero. “Deutsche Bank is a natural suspect for the move in the Bund yields,” said Ciaran O’Hagan, strategist at Societe Generale. Tokyo shares rose yesterday as investors gave Hillary Clinton the nod against rival Donald Trump in the first US presidential debate. The Japanese market had opened lower following declines on Wall Street ahead of the highly anticipated showdown between the pair who are locked in a neck and neck race for the White House. — Agencies BUSINESS WEDNESDAY, SEPTEMBER 28, 2016 Europe’s bank angst sours US debate rally

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Page 1: WEDNESDAY, SEPTEMBER 28, 2016 Europe’s bank angst sours …news.kuwaittimes.net/pdf/2016/sep/28/p24.pdf · on nagging worries about the lender’s health ... kets were also in flux

LONDON: Worries about Europe’s bankswrenched stocks into reverse yesterday andhalted a surge in Mexico’s peso that followedDemocrat Hil lar y Clinton’s victor y overRepublican Donald Trump in the first US presi-dential debate. Europe’s mood soured asDeutsche Bank shares hit another record lowon nagging worries about the lender’s healthand left Wall Street futures pricing in barely arise for the S&P 500 and Dow Jones Industrial.

Trading was still expected to still be freneticafter a marathon TV debate between Trumpand Clinton on Monday evening that was esti-mated to have pulled in nearly 100 millionviewers.

Markets have tended to see Clinton as the

candidate of the status quo, while few are surewhat a Trump presidency might mean for USforeign policy, international trade deals or thedomestic economy. Snap polls after the debatesuggested Clinton had bolstered her chancesof winning November’s election. She accusedRepublican Trump of racism, sexism and taxavoidance while the real estate tycoon, makinghis first run for public office, said Clinton’s longyears of service represented “bad experience”.

For markets the clear victor was the Mexicanpeso, which surged as much as 2.3 percentafter hitting an all-time lows on fears that aTrump presidency would threaten Mexico’sexports to the United States, its single biggestmarket. Those gains had been pruned to just

over 1.6 percent before the start of US andMexican trading although the currency didn’tlook keen to give back much more.

“The Mexican peso has become the mainmarket proxy for Trump on-Trump off,” saidSaxo Bank’s head of FX strategy John Hardy,pointing to its near 9 percent fall versus thedollar this year.

“It was probably becoming a bit too cheap ...but as long as you don’t know the result of USelection that proxy (US election) risk is proba-bly going to stay.” Deutsche Bank wasn’t theonly European banks in the firing line. Shares inUK-based Standard Chartered fell 2.5 percenton reports that it was facing a US probe over anIndonesian investment.

Europe was also digesting news that areferendum over Italian Prime MinisterMatteo Renzi’s flagship constitutionalreform will be held on Dec 4, with the fateof his administration likely to hinge on theoutcome. It was one of the latest dates hecould have picked and gives him maxi-mum time to try and turn around what atpresent looks like a defeat. That offeredinvestors some comfort and Italian bondyields fell to a 2-1/2-week low.

“It is being kicked down the road quitea bit, this can,” said Rabobank’s head ofmacro strategy research Elwin de Groot.“He is trying to buy time but that couldalso be a risk. He is banking that he willwin back a bit of public support but thereis the possibility that he might not.”

OIL PRESSUREThere was mixed news from the

European Central Bank as data showedloans to eurozone businesses dippedslightly in August despite its massive stim-ulus program. The euro fell for the firsttime in five days, slipping 0.25 percent to$1.1225 and to 1.1563 per pound. Oil mar-kets were also in flux as the world’s largestproducers gathered in Algeria to discussways to tackle a crude glut that has bat-tered prices for two years now. A sourcefrom Iran, where production is on thecomeback after years of international sanc-tions, told Reuters it wanted 12.7 percentof any new OPEC output ceiling to help itreclaim its market share. Saudi Arabia hassuggested it would need Iran to freeze itsproduction for it to do the same.

In Asia, MSCI’s broadest index of Asia-Pacific shares outside Japan had recouped

early losses to rise 0.6 percent and Japan’sNikkei swung 0.8 percent higher, havingbeen down 1.5 percent at one stage. TheUS dollar rebounded as high as 100.83 yenfrom a one-month low around 100.08though it was fading again in the first flur-ry of New York trading as European bank-ing sector strains returned.

Hong Kong’s Hang Seng indexadvanced 1.1 percent to 23,571.79 andTokyo’s Nikkei 225 was up 0.6 percent at16,635.29. The Shanghai Composite Indexwas unchanged at 2,969.14. Seoul’s Kospiadded 0.9 percent to 2,017.94 andSydney’s S&P-ASX 200 rose 0.4 percent to5,497.40. India’s Sensex gained 0.2 percentto 28,342.26 and benchmarks in NewZealand and Thailand advanced. OtherSoutheast Asian markets declined.

The yen’s safe-haven counterparts werereclaiming ground too. Yields on US 10-year Treasuries, which move inversely toprices, dropped to a three-week low of1.54 percent, from 1.60 percent overnight.German two-year yields hit a record low asFinland became the third eurozone coun-try after Germany and the Netherlands tosee its 10-year yields drop below zero.“Deutsche Bank is a natural suspect for themove in the Bund yields,” said CiaranO’Hagan, strategist at Societe Generale.

Tokyo shares rose yesterday asinvestors gave Hillary Clinton the nodagainst rival Donald Trump in the first USpresidential debate. The Japanese markethad opened lower following declines onWall Street ahead of the highly anticipatedshowdown between the pair who arelocked in a neck and neck race for theWhite House. — Agencies

BU S INE S SWEDNESDAY, SEPTEMBER 28, 2016

Europe’s bank angst sours US debate rally