Asia stocks slide as Deutsche sours mood, oil pulls back

SINGAPORE: Asian stocks extended losses yesterday as worries about the health of Deutsche Bank weighed on financial shares and as oil prices inched back from near-one month highs on scepticism over OPEC’s new plan to curb output.

European markets are also poised for sharply lower starts, with spreadbetters calling for Britains’s FTSE 100 to open down 0.9 per cent, France’s CAC 40 to begin the day down 1.1 per cent and Germany’s DAX and Euro Stoxx 50 to trade 1.2 per cent lower on the open.

MSCI’s broadest index of AsiaPacific shares outside Japan lost 1 per cent and was on track for a 0.9 per cent drop for the week.

But it is poised for a 1.7 per cent gain in September, and a 9 per cent jump in the third quarter.

On Thursday, Wall Street lost about 1 per cent as Deutsche Bank shares slumped to a record low after a report that trading clients had withdrawn excess cash and positions held in the largest German lender.

The bank’s US shares closed down 6.7 per cent at US$11.48 after earlier falling to as low as US$11.185.

The immediate cause of Deutsche’s crisis is a fine, disputed by the lender, of up to US$14 billion by the US Department of Justice over its sale of mortgage-backed securities.

But Germany’s biggest bank has struggled for years, highlighting Europe’s inability or unwillingness to push through tough but much needed financial sector reforms.

A grilling of Wells Fargo’s chief executive by US lawmakers following a scandal over its opening of client accounts without agreement also helped push the S&P bank index down 1.6 per cent.

A raft of data out of the US next week is also contributing to market jitters, with the chance of a Federal Reserve interest rate hike in December still seen at around 50-50.

Numbers to watch include September manufacturing and August construction spending data on Monday, non-manufacturing indexes for September and August factory orders on Wednesday and non-farm payrolls for September on Friday.

“People are very nervous going in to next week, with risk factors including the US election and economy, with payrolls coming out next week,” said Stefan Worrall, director of Japan equity sales at Credit Suisse in Tokyo. “So it’s normal to expect volatility in an air pocket of uncertainty.”

Japan’s Nikkei closed down 1.5 per cent after weaker-thanexpected consumption and inflation data.

It recorded a loss of 2.6 per cent for the month, but ended the quarter up 5.6 per cent. — Reuters