by John BIERS
NEW YORK, United States (AFP) — Deutsche Bank’s woes and the looming first debate between battling US presidential candidates Donald Trump and Hillary Clinton helped send global markets broadly lower Monday.
Banking shares in the US and Europe fell sharply following reports that Berlin has refused state aid to fortify Deutsche Bank as it faces a multibillion-dollar fine in the United States over its sale of mortgage-backed securities before the 2008 financial crisis.
Shares in Germany’s biggest lender sank to a historic low, plunging by 7.5 percent to end the day at 10.55 euros ($11.87), dragging down Frankfurt’s DAX 30 by 2.2 percent.
“Given the state of the news, people are selling almost in a panic,” said analyst Michael Seufert of NordLB bank.
Other banks to fall included fellow German giant Commerzbank, down 3.8 percent, BNP Paribas of France, shedding 3.3 percent, and Bank of America, off 2.7 percent.
Meanwhile shares of the eight largest US banks deemed “systemically important” were also hit after the Federal Reserve’s top regulator said higher capital requirements were on the way for them.
JPMorgan Chase lost 2.2 percent; Wells Fargo, 1.9 percent; and Morgan Stanley, 2.8 percent.
The worries at Deutsche Bank are focused on the US government’s demand for a $14 billion fine to be paid due to the bank’s activities leading into the financial crisis.
“While the eventual fine may not be anywhere near that much, the litany of legal problems has raised concerns about the health of one of Europe’s largest lenders and any contagion effect to the rest of Europe’s sickly banking sector,” said Michael Hewson, chief market analyst at CMC Markets UK.
Global selloff
Nearly all leading markets were sharply lower Monday. In Asia, Japan’s Nikkei index lost 1.3 percent, Shanghai fell 1.8 percent and Mumbai 1.3 percent.
In Europe the Paris CAC 40 lost 1.8 percent, and London’s benchmark FTSE 100 index fell 1.3 percent.
On Wall Street, the S&P 500 shed 0.9 percent.
Shares in Turkey were hit with a 3.8 percent loss after Moody’s cut its rating on the country’s sovereign bonds to “junk” level late Friday, citing rising debt, lower reserves and the impact on the economy of political turmoil.
Anxiety over US elections
Investors were uneasy over the debate showdown Monday night between Republican Trump and Democrat Clinton, with polls showing them virtually tied ahead of the November 8 election, said Peter Cardillo, chief economist at First Standard Financial.
“The market is beginning to realize that it may not be an easy win for Clinton,” Cardillo said.
“Normally a Republican win would be positive for the stock market, but with Trump it may create a lot of uncertainties.”
The anxiety is due to Trump’s sharp opposition to free-trade agreements and concerns that his election could cause economic damage due to major policy shifts, said Cardillo.
“Don’t expect risk markets to move decisively until dust settles on the US presidential arena,” John Blank, of Zacks Investment Research, said in a note to clients.
Key figures around 2100 GMT
New York – DOW: DOWN 0.9 percent at 18,094.83 (close)
New York – S&P 500: DOWN 0.9 percent at 2,146.10 (close)
New York – Nasdaq: DOWN 0.9 percent at 5,257.49 (close)
London – FTSE 100: DOWN 1.3 percent at 6,818.04 (close)
Frankfurt – DAX 30: DOWN 2.2 percent at 10,393.71 (close)
Paris – CAC 40: DOWN 1.8 percent at 4,407.85 (close)
EURO STOXX 50: DOWN 1.9 percent at 2,975.88 (close)
Tokyo – Nikkei 225: DOWN 1.3 percent at 16,544.56 (close)
Hong Kong – Hang Seng: DOWN 1.6 percent at 23,317.92 (close)
Shanghai – Composite: DOWN 1.8 percent at 2,980.43 (close)
Euro/dollar: UP at $1.1254 from $1.1228 late Friday
Dollar/yen: DOWN at 100.30 yen from 101.02 yen
Pound/dollar: UP at $1.2976 from $1.2972
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