On 26 September, 2016 – A global retreat

Stocks tumbled world-wide on concerns about banks. Investors waited for the results of the OPEC meeting in Algiers.
United States
US stock indices followed those in Europe and Asia and declined. Bank stocks were down after Deutsche Bank shares hit a record low. Crude oil prices gained and the US dollar retreated. The Dow Jones industrials, S&P and Nasdaq each lost 0.9 percent. The price of oil rose sharply and energy companies traded higher.
Pfizer pulled shares of drug companies down after it announced it would not break up into two companies. The company had been considering the move for several years and said it might speed up growth for some of its businesses. Pfizer tried and failed to complete two $100 billion-plus mergers recently but agreed to buy the cancer drug maker Medivation for about $14 billion in August. Merck and Bristol-Myers Squibb also declined.
Deutsche Bank slumped after the German newsweekly Focus said the German government would not help the bank by intervening with American officials who want Deutsche Bank to pay $14 billion to end an investigation into its sale of mortgage-backed securities. The report, published Friday, cited government sources. Banks were also hurt by falling bond yields, which mean lower interest rates and smaller profits on lending. Goldman Sachs and Citigroup retreated.
Home Depot and Lowe’s sank after the government said sales of new homes fell almost 8 percent in August. However, the decline followed an outsized jump in July. Michael and Carnival also were lower. Chemtura climbed after the company agreed to be bought by Lanxess of Germany. Lanxess is paying $33.50 per share for Chemtura. The companies valued the deal at $2.5 billion. CBOE Holdings, the parent company of the Chicago Board of Exchange, will buy Bats Global Markets. The companies valued the deal at $3.2 billion or $32.50 in cash and stock per share of Bats.
These data reflect observations at 4:00 PM US ET. Gold at the afternoon London fixing was up US$1.85 to US$1,340.50. Copper futures were down 0.55 percent to US$2.19. WTI spot crude was up US$1.19 to US$45.67. Dated Brent spot crude was up US$1.17 to US$47.06. The US dollar was down against the yen, euro, Swiss franc and the Australian dollar. However, it advanced against the Canadian dollar and was unchanged against the pound. The Dollar Index was down 0.3 percent. The yield on US Treasury 30 year bond was down 3 basis points to 2.32 percent while the yield on the 10 year note declined 4 basis points to 1.58 percent.
Europe
Stocks tumbled thanks to a wide range of concerns. Investors were cautious before the first US presidential debate to be held Monday night US ET. Energy stocks weakened before the OPEC meeting in Algiers while banks and financial stocks were under pressure due to concerns over Deutsche Bank. In addition, the Bank of Japan Governor Haruhiko Kuroda stated that the bank is willing to use every possible tool, if necessary, to achieve its price stability objective. “There is no better opportunity than now to completely get out of deflation,” he told business leaders in Osaka. Just talking about a limit to monetary policy does not help at all, said Kuroda. The FTSE and SMI lost 1.3 percent, the CAC declined 1.8 percent and the DAX dropped 2.2 percent.
Deutsche Bank tumbled after the German magazine Focus reported Chancellor Angela Merkel has ruled out any state aid for the bank. Commerzbank also dropped. Lanxess surged after it announced it would buy specialty chemicals company Chemtura. In Paris, BNP Paribas, Société Générale and Crédit Agricole were lower. Total and Technip declined.
In London, InterContinental Hotels dropped on a broker downgrade. Lloyds Banking Group also declined on a broker downgrade. Royal Bank of Scotland, Barclays, Standard Chartered and HSBC also tumbled. WPP weakened on a broker downgrade. Lamprell jumped after obtaining a new contract worth about $90 million from Jacktel, a unit of Master Marine. Novartis declined in Zurich despite getting three FDA approvals for the expanded use of Ilaris to treat three rare and distinct types of periodic fever syndromes. Resource-related stocks also lost ground with Anglo American, Antofagasta, Rio Tinto and Glencore all declining.
German September Ifo Business Climate Index climbed to 109.5 points from a revised 106.3 points in August, marking its highest level since May 2014. Italy’s retail sales decreased in July after rising in the previous three months. UK mortgage approvals declined to the lowest level in 20 months in August according to the British Bankers’ Association.
Asia Pacific
Asian stocks declined Monday after US shares retreated on Friday following three days of gains. While oil prices recovered some lost ground in Asian deals, traders remained cautious ahead of Monday night’s first US presidential debate and an informal OPEC meeting in Algiers that begins today.
Chinese shares tumbled to hit seven week lows in thin trading, as investors moved to the sidelines ahead of the week-long National Day holiday starting on October 1. The Shanghai Composite dropped 1.8 percent, with property stocks taking a fresh beating after Nanjing, capital of East China’s Jiangsu province, adopted new rules restricting home purchases. The Hang Seng index was down 1.6 percent.
The Nikkei declined 1.3 percent and the Topix was 1.0 percent lower as the US dollar wobbled against the yen and euro ahead of this week’s speeches by the heads of central banks in the US, Europe and Japan. Banks Mitsubishi UFJ Financial, Mizuho Financial and Sumitomo Financial dropped after BoJ Governor Haruhiko Kuroda said there is no limit to monetary policy and the central bank will never hesitate to challenge. Exporters Honda Motor, Mazda, Nissan, Panasonic and Sharp Corp retreated. Apple suppliers TDK and Japan Display tumbled amid reports that Apple sales of the iPhone 7 have dropped compared to the iPhone 6.
Both the S&P/ASX and All Ordinaries were virtually unchanged. While the big four banks ended flat to marginally higher, miners BHP Billiton, Rio Tinto and Fortescue Metals Group closed narrowly mixed. Woodside Petroleum, Beach Energy and Santos were lower after crude oil futures fell on Friday in the wake of reports that Saudi Arabia does not expect an output agreement to stabilize the market in talks in Algiers this week.
The Kospi slipped 0.3 percent as foreign investors resumed selling. The Sensex dropped 1.3 percent.
Looking Forward
The Eurozone posts August M3 money supply. In the US, July S&P Case Shiller HPI and September flash services PMI and consumer confidence will be reported.
Global Stock Markets

*Note — all releases are listed in local time.

Source: Fidelity

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