Europe Stocks Lifted by Firmer Oil Price
28 September 2016 - 7:58PM
Dow Jones News
By Riva Gold
Stocks were mostly higher Wednesday despite a downbeat session
in Asia, boosted by a modest rebound in oil prices.
Futures pointed to a 0.2% opening gain for the S&P 500,
while the Stoxx Europe 600 was up 0.9% in morning trade, led by
some of the week's worst performing sectors.
Oil and gas companies moved higher as Brent crude oil rose 0.7%
to $46.83 a barrel. Oil had fallen sharply in the previous session
after Saudi Arabia said it sees no chance of an output cap at a
meeting concluding later Wednesday in Algiers, but market
participants appeared to take heart in the prospect of a more
definitive plan to curb production in November.
Europe's banking sector also showed signs of a nascent recovery
from a rough start to the week, with shares of Deutsche Bank up
2.6% after Chief Executive John Cryan said the bank never asked the
German government to intervene or financially assist in a dispute
with the U.S. Department of Justice.
The German lender is still down around 5% so far this week,
having touched its lowest price in decades amid concerns about its
capital position.
Shares of Royal Bank of Scotland Group initially fell around 3%
on Wednesday after news the U.K. lender agreed to pay $1.1 billion
to a U.S. regulator, but later recovered to trade up 1.1%.
Investors are watching the health of the European banking sector
closely. The Euro Stoxx Banks index is down 28% so far this year.
Recent falls in bank shares are particularly worrisome in Europe,
where banks constitute a significant share of direct lending into
the economy, said Jamie Cox, managing director at Harris Financial
Group.
"It's a very ugly situation," he said. On top of the potential
fines, "interest rates globally are low and it doesn't appear there
are prospects of them going up anytime soon--when you're a
financial institution and you live off the spread, it's
difficult."
Investors largely expect the European Central Bank and Bank of
Japan to ease policy further in the coming months, while
expectations for the Federal Reserve to raise rates in December
have fallen in recent sessions.
Fed-fund futures, used by investors to bet on central bank
policy, suggest a less than 50% chance of higher interest rates by
December, according to data from CME Group.
Investors may get more detail on the course of interest rates
later Wednesday in comments from European Central Bank President
Mario Draghi and Federal Reserve Chairwoman Janet Yellen.
Ms. Yellen is set to testify before the House Financial Services
Committee about financial regulation.
Earlier, Japan's Nikkei Stock Average fell 1.3%, leading wider
Asian bourses lower. Investors were concerned about an earlier
decline in the price of oil and the impact of negative interest
rates on Japanese banks.
Hong Kong's Hang Seng Index fell 0.1%, the Shanghai Composite
Index fell 0.3% and shares in Australia were little changed.
In currencies, the dollar inched slightly higher against most
major currencies, with the WSJ Dollar Index up 0.2%. The euro was
down 0.1% against the dollar at $1.1203, while the dollar gained
0.4% against the yen to Yen100.7350.
The yield on the 10-year U.S. Treasury note rose to 1.575% from
1.556% on Tuesday after eight consecutive sessions of declines, its
longest losing streak since the middle of June. German bund yields
were little changed at minus 0.143%.
Jenny Hsu contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
September 28, 2016 05:43 ET (09:43 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.