Oil con­cerns tem­per Euro­pean stocks

Asian shares edge lower, yen strength hits Tokyo

Kuwait Times - - BUSINESS -

Oil prices fell more than 1.5 per­cent yes­ter­day, cap­ping gains on Euro­pean eq­ui­ties, as mar­kets waited to see whether OPEC would be able to ham­mer out a mean­ing­ful out­put cut dur­ing a meet­ing to rein in a global sup­ply over­hang and prop up prices. Ital­ian bank­ing stocks staged some­thing of a re­cov­ery af­ter Monte dei Paschi’s res­cue plan got off to an en­cour­ag­ing start but min­ers came un­der re­newed sell­ing pres­sure af­ter a sharp de­cline in com­modi­ties prices.

“The fact that the FTSE 100 is go­ing one way and the FTSE 250 is go­ing the other way sug­gests that there is a sec­tor spe­cific event go­ing on, as the FTSE 100 is more com­modi­ties heavy,” said In­vestec econ­o­mist Philip Shaw.

The miner-heavy FTSE 100 in­dex was down 0.56 per­cent but the FTSE Mid 250 edged higher at 1145 GMT. Out­side of the com­modi­ties sec­tor, in­vestors ap­peared in­clined to take on more risk, with Ital­ian stocks up 0.94 per­cent and the bank­ing sub-in­dex up 2.3 per­cent. This helped push the STOXX Europe 600 In­dex up 0.16 per­cent in early trades, though it head­ing back to­wards par­ity by 1145 GMT. “There seems to be some hope that Monte dei Paschi’s debt-for-equity swap will go through, but I don’t think any­one is op­ti­mistic about the bank­ing sec­tor in Italy,” said OANDA se­nior mar­ket an­a­lyst Craig Er­lam. Monte dei Paschi’s res­cue plan got off to a good start af­ter Gen­er­ali’s board ap­proved a con­ver­sion of 400 mil­lion eu­ros in Monte dei Paschi sub­or­di­nated bonds into shares, ac­cord­ing to Ital­ian press re­ports.

MSCI’s broad­est in­dex of Asia-Pa­cific shares out­side Ja­pan fell 0.27 per­cent af­ter two days of gains. Tokyo stocks slipped 0.3 per­cent, hit by a rel­a­tively strong yen.

Euro­pean gov­ern­ment bond mar­kets were also trend­ing in this di­rec­tion, with safe-haven Ger­men gov­ern­ment bond yields up 1-2 ba­sis points and lower-rated Ital­ian, Span­ish and Por­tuguese bond yields lower. Italy, in fo­cus ahead of a ref­er­en­dum this week­end, led the gains on the day with its 10-year bond yields down 6.9 ba­sis points to 1.98 per­cent. Yields also fell af­ter Reuters re­ported that the Euro­pean Cen­tral Bank is ready to by more Ital­ian bonds if there is tur­moil af­ter the con­sti­tu­tional ref­er­en­dum on Sun­day.

“Citi’s base case is for a No vote to pre­vail with po­lit­i­cal un­cer­tain­ties likely to re­main el­e­vated over the near-term,” wrote an­a­lysts at Citi. “It’s worth watch­ing whether PM Renzi re­signs in the event of a No vote as promised, be­fore rush­ing into euro shorts.” The event has brought Italy’s ail­ing bank­ing sec­tor sharp re­lief, and ear­lier this week Ital­ian bank­ing stocks hit their low­est point since end-Septem­ber on con­tin­ued wor­ries over a cash call at trou­bled Monte dei Paschi. “Renzi has been such a mas­sive driv­ing force in terms of find­ing al­ter­na­tives to re­form the bank­ing sec­tor, so him go­ing would be prob­lem­atic even with­out con­sid­er­ing the po­lit­i­cal in­sta­bil­ity it would bring,” said Er­lam.

The po­lit­i­cal risk kept the euro re­strained de­spite the pull­back in the dol­lar. The sin­gle cur­rency fell 0.17 per­cent to $1.0597. The dol­lar was again mov­ing higher on the yen to reach 112.615, af­ter profit-tak­ing pulled it down as far as 111.58. It re­mains over 7 per­cent higher for the month. Deal­ers re­ported Ja­panese buy­ing for the new month with or­ders to­day set­tling on Dec 1.

Against a bas­ket of cur­ren­cies, the dol­lar held at 101.330 and not far from last week’s 14-year peak. The green­back was still on track for its strongest twom­onth gain since early 2015, un­der­pinned by ex­pec­ta­tions the Fed­eral Re­serve is al­most cer­tain to hike in­ter­est rates next month. — Reuters

SHANG­HAI: A man fills a wheel cart with ce­ment at a construction site of a res­i­den­tial sky­scraper in Shang­hai yes­ter­day. Chi­nese house­hold debt has risen at an ‘alarm­ing’ pace as prop­erty val­ues have soared, an­a­lysts say, rais­ing the risk that a real es­tate down­turn could send shock­waves through the world’s sec­ond largest econ­omy. —AFP

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