Friday 08:30 BST. Stock markets are faltering, while the yen and government bond prises are rising, as revived concerns about the European banking system, alongside softer oil prices, rattle investors’ appetite for risk.
After the FTSE Asia Pacific index fell 1 per cent, US index futures suggest the S&P 500 will open later on Wall Street at 2,145, shedding another 6 points after Thursday’s 20-point retreat.
The pan-European Stoxx 600 is off 1.7 per cent, with commodity stocks relinquishing some of their recent strong gains.
The European Stoxx Oil and Gas producers index jumped 4.4 per cent in the previous session as oil prices enjoyed a two-day pop of 7.1 per cent in response to an Opec proposal to cut production. But the sector is retreating 1.8 per cent on Friday as Brent crude slips 1 per cent to $48.73 a barrel.
It is the financial sector, however, that is the source of most market angst. The European Stoxx Banking index is down 3.7 per cent as shares in Deutsche Bank slide 8.7 per cent following a report that hedge funds were pulling business from the giant German lender amid concerns about its capital position.
Deutsche’s woes — its shares this week hit multi-decade lows in the wake of the US authorities proposing a $14bn dollar fine for the mis-selling of mortgage-backed securities — 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 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 4 basis points to minus 0.16 per cent and equivalent maturity Treasuries, which lost ground late on Thursday, are off another 2bp to 1.54 per cent.
Gold is gaining $4 to $1,324 an ounce and the Japanese yen is 0.2 per cent firmer at ¥100.86 per dollar, having recovered from an early bout of weakness that took it to ¥101.75 after a batch of mostly disappointing economic data.
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 1.8 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
Sample the FT’s top stories for a week
You select the topic, we deliver the news.