By Riva Gold and Aaron Kuriloff
Shares of banks slid Monday, dragging on major indexes
worldwide.
The Dow Jones Industrial Average fell 125 points, or 0.7%, to
18136. The S&P 500 fell 0.6%, and the Nasdaq Composite dropped
0.7%.
Investors sold bank shares in the U.S., Europe and Japan in the
wake of recent central bank meetings that suggested easy money
policies were likely to continue, with low interest rates typically
hitting profits at financial firms.
Financial shares were among the biggest decliners in the S&P
500, falling 1.1% and the KBW Nasdaq Bank Index of large U.S.
commercial lenders lost 1.5%. Declines in bank stocks helped push
the Stoxx Europe 600 down 1.6%, following losses in Asia.
Some traders and investors said reports of capital issues at
Deutsche Bank were adding to concerns about the sector. Deutsche
Bank fell 7.5% to the lowest price in at least 20 years, according
to FactSet.
"It's going to be tough to have a rally in the market when you
hear that Deutsche Bank could be having capital issues and the
stock's at all-time lows," said R.J. Grant, director of equity
trading at KBW Inc.
The German lender's shares have been hit recently by fears it
may need a capital increase, after The Wall Street Journal reported
this month that the U.S. Justice Department proposed that Deutsche
Bank pay $14 billion to settle a set of high-profile
mortgage-securities probes.
The bank said Monday that it wasn't currently considering a
capital increase. "The question isn't one being posed now," the
bank said.
Analysts also attributed some of the losses to a local magazine
report over the weekend suggesting German Chancellor Angela Merkel
would rule out assistance for the lender, whose shares are down
more than 50% so far this year.
Japan's Nikkei Stock Average fell 1.3% as banks and life
insurance companies were hit by a speech by Bank of Japan Gov.
Haruhiko Kuroda suggesting the Japanese central bank was prepared
to make further cuts to short-term interest rates. Ultralow or
negative interest rates erode banks' net interest margins, keeping
share prices depressed.
With major central bank meetings out of the way, global
investors were watching a meeting of energy producers and the U.S.
presidential election.
Oil and gas companies were among the biggest decliners in Europe
as major oil producers met in Algiers to discuss a possible deal on
limiting production.
OPEC members and Russia have substantial issues to resolve but
still expect to make progress toward a comprehensive deal, energy
ministers said.
U.S. crude gained 3.4% to $46.01 a barrel in choppy trade after
prices sank around 4% on Friday. Shares of energy companies in the
S&P 500 rose 0.2%.
"We can't come out empty-handed," said Nourredine Bouterfa,
Algeria's oil minister, warning that oil prices could drop back
into the $30s if OPEC fails to come to terms this week.
Even without such a deal, some investors said stabilizing oil
prices could help improve corporate earnings. Energy companies have
dragged on earnings in the S&P 500, which are expected to fall
for a sixth consecutive quarter, according to FactSet.
Even without a production deal, some investors said oil prices
have stabilized in the range around $40 and $50 a barrel, which
bodes well for energy company earnings.
"The earnings recession is in the energy sector as much as
anything else and we think the energy sector is going to come out
of that," said Tony Roth, chief investment officer at Wilmington
Trust.
Earlier, Hong Kong's Hang Seng and the Shanghai Composite Index
fell by 1.6% and 1.8%, respectively, echoing Friday's losses on
Wall Street, while markets in Australia were largely flat.
The dollar fell 0.7% against the yen to Yen100.3760.
The euro gained 0.2% against the dollar to $1.1253 after data
showed German business sentiment unexpectedly improved in September
to its highest level since May 2014. European Central Bank
President Mario Draghi is scheduled to speak later Monday.
In bond markets, the yield on 10-year German government debt
fell to minus-0.113%, while the 10-year U.S. Treasury note fell
slightly to 1.593%, according to Tradeweb, from 1.615% on Friday.
Yields move inversely to prices.
Several investors also said they were watching tonight's U.S.
presidential debate for signs that a tightening race might break
toward one candidate or the other and indications of how that might
affect financial markets.
A new Wall Street Journal/NBC News poll found that 34% of
registered voters expect the three presidential debates to be
important in helping them decide how to vote.
While stock markets have risen steadily over the summer, some
investors expect the election, along with the price of oil, to
trigger increased volatility in stock markets in October and
November.
So far, most of the election-related volatility has been limited
to movements in health-care shares and the Mexican peso, some
analysts said.
Write to Riva Gold at riva.gold@wsj.com and Aaron Kuriloff at
aaron.kuriloff@wsj.com
(END) Dow Jones Newswires
September 26, 2016 12:54 ET (16:54 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.