Wall Street declines after Yellen bank remarks; oil prices seesaw

Dollar gains against euro; gold down

NEW YORK, Sept 28, (Agencies): US stock prices slipped on Wednesday after comments from Federal Reserve Chair Janet Yellen raised concerns about increased banking regulations, while oil prices rose in choppy trading amid hopes of an output agreement and data showing a bigger-than-expected increase in US gasoline inventories.

The dollar rose against the euro as European Central Bank President Mario Draghi said low interest rates are needed to revive growth and governments need to do their part if they want rates to eventually return to normal levels.

Gold prices fell to a one-week low on a stronger greenback.

Testifying at a House of Representatives Financial Services Committee hearing on Wednesday, Yellen said the Fed is “now considering making several changes to our stress testing methodology and process.”

For the eight US banks that are large and considered important to the global financial system, the new buffer calculation “would result in a significant aggregate increase in capital requirements,” Yellen said.

The S&P financial index was down 0.4 percent.

Deutsche Bank shares rebounded 2 percent to 10.755 euro a share on Wednesday after Berlin denied it was working on a rescue of the bank, which boosted its balance sheet by selling its British insurance business.

Germany’s biggest lender faces big fines over claims it mis-sold mortgagebacked securities and, like other euro zone lenders, has been squeezed by the ECB’s negative rate policy. Its shares, which hit record lows on Tuesday, have fallen some 50 percent this year.

The rise in Deutsche shares helped European stocks and provided early support to equities in other major markets.

In midday US trading, the Dow Jones industrial average was down 16.47 points, or 0.09 percent, to 18,211.83, the S&P 500 was 3.74 points, or 0.17 percent, lower at 2,156.19 and the Nasdaq Composite was down 11.56 points, or 0.22 percent, to 5,294.15. Europe’s broad FTSEurofirst 300 index was 0.69 percent higher at 1,348.31.

The MSCI world equity index, which tracks shares in 45 nations, fell 0.74 points or 0.18 percent, to 416.83.

Brent crude was last up $1.28, or 2.78 percent, at $47.25 a barrel. US crude was last up $1.02, or 2.28 percent, at $45.69 per barrel.

In the currency market, the dollar index, which tracks the greenback versus the euro, yen and four other currencies, rose 0.227 points or 0.24 percent, to 95.662.

The euro was down 0.2 percent at $1.1192.

The benchmark 10-year Treasury note yield hovered near its lowest level more in more than two weeks at 1.551 percent, while German 10-year Bund yield was little changed at -0.15 percent.

Spot gold prices fell $7.73 or 0.58 percent, to $1,319.41 an ounce.

US

Wall Street was lower on Wednesday as health stocks weighed and financials fell after Federal Reserve Chair Janet Yellen said the central bank was considering changes to the annual stress test.

Yellen said the Fed was looking at a more risk-sensitive, firm-specific approach to the test that would raise capital requirements for big US banks based on their test results.

Shares of JPMorgan, Bank of America and Citigroup were down between 0.2-0.5 percent.

Healthcare sector weighed the most on the benchmark S&P 500 index as Bristol-Myers and Amgen fell 1.2 percent each. The index had risen 0.7 percent on Tuesday.

Adding to the downbeat market sentiment was the lowering of the 2016 US growth forecast by the International Monetary Fund.

At 12:31 p.m. ET (1631 GMT), the Dow Jones Industrial Average was down 21.71 points, or 0.12 percent, at 18,206.59.

The S&P 500 was down 3.94 points, or 0.18 percent, at 2,155.99.

The Nasdaq Composite was down 11.36 points, or 0.21 percent, at 5,294.35.

Ten of the 11 major S&P 500 indexes were in the red, with telecom services falling the most with a 1.4 percent drop.

AT&T’s 1.9 percent fall weighed the most on the sector. The stock was downgraded to “neutral” by UBS. Rival Verizon was down 1 percent.

The energy index was set to have its best day in a week on speculation that OPEC members gathered in Algeria could lay the foundation for a deal to limit output. Nike dropped 3.1 percent and was among the top drags on the S&P and the Dow after the shoemaker’s orders missed analysts’ estimates for the third time in a row.

UK

Britain’s blue-chip share index bounced back from a one-week low on Wednesday as engineering firm Smiths Group surged after posting higher-than-expected profits and miners tracked stronger metals prices.

The FTSE 100 index closed 0.6 percent higher at 6,849.38 points, in line with a broader rally in European stock markets, after falling to a one-week low in the previous session. It is up nearly 10 percent so far this year.

Smiths Group rose more than 4 percent as improved sales at two of its units, as well as cost cuts, helped it to beat analysts’ full-year revenue and pre-tax profit forecasts.

Mining companies were the top risers, with the sector index rising 1.4 percent. Rio Tinto, Anglo American and BHP Billiton rose between 0.8 percent and 2.7 percent as prices of major industrial metals advanced.

TUI advanced 1.3 percent after the holiday company lifted its core profit guidance for 2015/16, helped by strong demand from British tourists and a lower exposure than competitor Thomas Cook to Turkey, which has been hit by security fears.

The FTSE 100 fell in the previous two sessions on worries surrounding its banking sector. However, RBS’ $1.1 billion settlement to resolve claims in the United States that it sold mortgage-backed securities to credit unions did not weigh on its shares, which were up 1 percent.

Europe

European shares rose on Wednesday, helped by gains among commodity stocks, while Deutsche Bank recovered from all-time lows hit in the previous session.

Sentiment around the bank perked up after its CEO said there was no need for a cash call, while the German government denied a report that it was preparing a rescue plan for the bank.

The lender rose 2 percent after CEO John Cryan personally ruled out a possible capital increase, while the bank’s balance sheet was boosted after it sold its British insurance business.

Deutsche faces a $14 billion fine from the US Department of Justice for misselling mortgage-backed securities, and concerns over its funding depressed its shares to a record low on Tuesday.

Elsewhere in the sector, Royal Bank of Scotland rose 1 percent after the British bank agreed to pay $1.1 billion to settle claims that it sold toxic mortgage-backed securities to credit unions that later failed.

The pan-European STOXX 600 index rose 0.7 percent, ending off its highs, with commodity-related stocks giving up some of their strong early gains.

Basic resource stocks nevertheless ended up 1.4 percent, on the back of a rise in metals prices. Oil, however, gave up gains in volatile trade after mixed supply data, and the sector closed up just 0.7 percent.

Among other big movers, TUI rose 1.3 percent after the travel firm nudged up its full-year profit outlook, while Kone fell 2 percent after the Finnish elevator maker kept its targets unchanged.

Asia

Tokyo stocks led a broad retreat in Asian markets Wednesday as the yen recovered, while regional energy firms struggled with crude prices on concern about the chances of success at an upcoming producers’ meeting.

Energy firms from Sydney to Hong Kong were in the red, in line with losses on broader stock markets.

In Tokyo the Nikkei index closed down 1.3 percent, with a stronger yen dampening buying appetite.

The dollar bought 100.62 yen in Asian trade, slightly up from 100.36 yen in New York but it was still struggling after falling from the 100.88 yen seen earlier Tuesday in Asia.

Shanghai lost 0.3 percent by the close, Seoul shed 0.5 percent and Singapore dipped 0.1 percent in the afternoon, while there were also losses in Bangkok and Jakarta.

But Hong Kong staged a late burst to end 0.2 percent up and Sydney also closed slightly higher.

In Hong Kong the Postal Savings Bank of China was slightly higher at the end of its first trading day after the world’s biggest initial public offering for two years.

PSBC, China’s fifth largest lender, raised $7.4 billion in the IPO, the biggest since Alibaba’s $25 billion New York listing in 2014.

But analysts attributed the lukewarm interest to the recent flat performance of large Chinese financial firms on Hong Kong’s bourse owing to the glut of options. Key figures at 0800 GMT Tokyo - Nikkei 225: DOWN 1.3 percent at 16,465.40 (close)

Hong Kong - Hang Seng: UP 0.2 percent at 23,619.65 (close)

Shanghai - Composite: DOWN 0.3 percent to 2,987.86 (close)

Oil

Oil prices rose more than 2 percent in volatile trade on Wednesday on speculation that OPEC members gathered in Algeria could lay the foundation for a production-limiting deal in November.

Crude futures had gyrated after a surprise drop in US crude stockpiles for a fourth straight week was offset by a large build in gasoline.

Brent crude was up $1.20, or 2.7 percent, to $47.17 a barrel by 12:56 p.m. EDT (1656 GMT). It fell to a session low of $45.70 earlier, slipping into negative territory. US West Texas Intermediate (WTI) crude rose by $1, or 2.2 percent, to $45.67.

Gold

Gold prices hit a one-week low on Wednesday, as the dollar firmed and investors assessed Federal Reserve Chair Janet Yellen’s testimony before a Congressional committee.

Spot gold fell 0.4 percent to $1,322.95 an ounce by 1409 GMT. It fell nearly one percent on Tuesday, its biggest single-day loss in one month on a higher appetite for risk.

US gold futures eased 0.3 percent to $1,326.20 an ounce.

Gold’s next technical support level stands at $1,320, while the closest resistance is $1,350, MKS SA head of trading Afshin Nabavi said.

Gold is often seen as a hedge against oil-led inflation.

The dollar was up 0.1 percent against a basket of six major currencies, making gold more expensive for foreign currency holders.