Asia stocks slide as Deutsche sours mood, oil pulls back

Asian stocks extended losses on Friday 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 .FTSE to open down 0.9 percent, France’s CAC 40 .FCHI to begin the day down 1.1 percent and Germany’s DAX .GDAXI and Euro Stoxx 50 .SX5GU to trade 1.2 percent lower on the open.

MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS lost 1 percent and was on track for a 0.9 percent drop for the week.

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

On Thursday, Wall Street lost about 1 percent as Deutsche Bank shares slumped to a record low after a report that trading clients had withdrawn excess cash and positions held in the largest German lender.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 U.S. shares closed down 6.7 percent at $11.48 after earlier falling to as low as $11.185.

The immediate cause of Deutsche’s crisis is a fine, disputed by the lender, of up to $14 billion by the U.S. 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 U.S. lawmakers following a scandal over its opening of client accounts without agreement also helped push the S&P bank index down 1.6 percent.

A raft of data out of the U.S. 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 U.S. 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 .N225 closed down 1.5 percent after weaker-than-expected consumption and inflation data. It recorded a loss of 2.6 percent for the month, but ended the quarter up 5.6 percent.

While industrial output beat expectations in August, that did little to lift pressure on the central bank to ease monetary conditions further.

Some Bank of Japan board members doubted whether the central bank’s overhaul of its massive stimulus program, announced last week, would enhance flexibility of monetary policy, a summary of opinions at the central bank’s September rate review showed on Friday.

China’s CSI 300 index .CSI300 bucked the regional trend to rise 0.3 percent, paring losses for the month to 2.1 percent.

China’s factory activity inched up in September, in line with analyst forecasts, but growth was tepid. Output expanded in September but at the slowest pace in three months.

Chinese markets are closed for the National Day holiday all next week.

Oil prices pulled back after rising 7 percent in two days after OPEC agreed to its first output cuts in eight years.

Even if production is scaled back, some analysts doubted the reduction would be enough to make a substantial dent in the global crude glut.

“The accord has not yet defined individual quotas or other forms of accountability, suggesting that this is a soft output cut at best,” Francisco Blanch, commodity and derivatives strategist at Bank of America Merrill Lynch, wrote in a note.

“OPEC’s action won’t propel prices much above our $70 mid-year target,” he added.

U.S. crude futures CLc1 slipped 0.8 percent to $47.48. They closed up 1.7 percent at $47.83 on Thursday, after climbing to as high as $48.32, the highest level in almost five weeks. They’re on track for gains of 6.2 percent in September.

Brent crude LCOc1 also fell 0.8 percent to $48.86. They rose 1.1 percent to $49.24 on Thursday, after earlier touching a three-week high of $49.24. They’re on track to end the month 3 percent higher.

The losses for stocks and oil proved a win for gold XAU=, with the precious metal trading up 0.3 percent at $1,324 an ounce, bringing gains for the month to 1.2 percent.

The U.S. dollar advanced 0.1 percent to 101.15 yen JPY=D4, heading for a 0.1 percent gain for the week, but down 2.2 percent for September, and 2 percent for the quarter.

While the yen is headed for its third straight quarter of gains, speculation that Japanese investors may buy more foreign assets in their new business half-year starting from Oct. 1 could stem the Japanese currency’s gains in the near term.

The euro EUR=EBS slipped 0.1 percent to $1.12155, on track to end the month 0.5 percent stronger.

By Nichola Saminather | SINGAPORE

(Additional reporting by Lisa Twaronite in TOKYO; Editing by Jacqueline Wong and Kim Coghill)

Source: Reuters

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