Friday 14:35 BST. Wall Street is opening on the front foot and European stocks are striving to recover early losses as oil prices rally and concerns about the European banking system seem to abate.

Evidence of nervousness remain, however, with gold and Bund prices moving higher.

After the FTSE Asia Pacific index fell 1.1 per cent, the S&P 500 on Wall Street is trading at 2,160, recovering 9 of Thursday’s 20-point retreat.

The pan-European Stoxx 600, which had been down 1.8 per cent as banking and energy stocks fell back, is now off just 0.4 per cent as both sectors rebound sharply from initial falls.

Brent crude, at one point down 2 per cent on the day is up 0.1 per cent at $49.29 a barrel, holding its recent two-day 7 per cent pop in response to an Opec proposal to cut production.

It is the financial sector, however, that is the market’s main focus. The European Stoxx Banking index is down 1.1 per cent as shares in Deutsche Bank recover from an initial 9 per cent slump to trade down just 0.2 per cent after chief executive John Cryan wrote to staff to insist the bank had “strong foundations”.

The slide in Deutsche’s share price to multi-decade lows follows a report that hedge funds were pulling business from the giant German lender amid concerns about its capital position in the wake of the US authorities proposing a $14bn dollar fine for the mis-selling of mortgage-backed securities.

The bank’s travails have sparked fresh concerns about the health of the European financial sector.

Indeed, for some market watchers the withdrawal of client funds is reminiscent of the stresses evident at the height of the financial crisis nearly a decade ago.

The business models of Deutsche and other banks in Europe and Japan are under pressure as their monetary guardians adopt negative interest rates in an attempt to boost economic growth.

And adding to the sense of a sector embattled is weakness for its investment banking arms as global dealmaking hits a three-year low, and a caustic regulatory environment, notably in the US, where Wells Fargo is feeling the wrath of lawmakers following its fake accounts scandal.

The lingering anxiety over Deutsche is encouraging traders to park funds in perceived havens. German 10-year Bund yields, which move inversely to the bond price, are down 1 basis point to minus 0.13 per cent.

Even gilts are 2bp softer at 0.70 per cent despite a survey showing the UK service sector grew more than expected in July.

Gold is gaining $3 to $1,323 an ounce and the Japanese yen, though 0.1 per cent weaker at ¥101.15 per dollar, has recovered from a sharp early decline that took it to ¥101.75 after a batch of mostly disappointing economic data.

Reports released on Friday showed Japanese consumer prices remained in deflationary territory, household spending tumbled in August and the country’s jobless rate nudged up.

Marcel Thieliant, senior Japan economist at Capital Economics, said that while consumer spending data “send conflicting messages for third-quarter gross domestic product growth, the solid rise in industrial production in August suggests that Japan’s economy continued to recover in the third quarter”.

Still, the Japanese stock market succumbed to the region’s sour mood inherited from Wall Street overnight, with the Nikkei 225 dropping 1.5 per cent.

Australia’s S&P/ASX 200 index fell 0.65 per cent, and in Hong Kong, the benchmark Hang Seng index fell 1.9 per cent. China’s mainland markets bucked the trend, with the Shanghai Composite adding 0.2 per cent following a Caixin manufacturing PMI reading that showed a return to marginal growth in September. Trading in China was cautious ahead of the Golden Week holiday.

Additional reporting by Hudson Lockett in Hong Kong

For market updates and comment follow us on Twitter @FTMarkets



Source link