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Europe: Deutsche Bank drags equities lower

Tuesday, March 7, 2017 - 06:41

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[NEW YORK] European stocks sank on Monday after Germany's troubled Deutsche Bank unveiled plans over the weekend to raise 8.0 billion euros (S$11.95 billion) in fresh capital.

Sentiment also remained downbeat as investors took profits from last week's surge, which was rooted in hopes of a public spending splurge under US President Donald Trump.

US stocks spent the whole day in the red, with analysts pointing to a variety of concerns, including the lack of progress on Mr Trump's economic agenda and the prospect of the Federal Reserve raising interest rates next week.

"President Trump switching gears from a conciliatory speech to accusing (former president) Barack Obama of wiretapping unwinds some of the cross-party good feelings that could have helped pass tax and spending reform policies," said Jasper Lawler, senior market analyst at London Capital Group.

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Shares in Deutsche Bank, Germany's biggest lender, dived nearly eight percent in Frankfurt, after announcing Sunday it would raise cash by issuing new shares.

The announcement marked a U-turn for CEO John Cryan, who until recently insisted no such move was needed.

There was fallout across the European financial sector.

Royal Bank of Scotland shares shed 2.6 per cent and Barclays gave up 1.9 per cent in London, while BNP Paribas and Societe Generale dropped 1.0 per cent and 2.0 per cent respectively in Paris.

London won a partial boost, however, after British financial services group Standard Life agreed to buy Aberdeen Asset Management for £3.8 billion (S$6.6 billion) to create one of the world's biggest fund managers.

The combined business will have a stock market capitalisation of £11 billion and oversee assets worth £660 billion - making it one of the largest investment managers in the world and the biggest in Britain.

The news sent Standard Life's share price 5.7 per cent higher, while Aberdeen stock gained 4.4 per cent.

Shares in French carmaker PSA revved 2.7 per cent higher after it announced the acquisition of General Motors' European subsidiary, which includes the Opel and Vauxhall brands, for 1.3 billion euros.

The move sees PSA regain its position as Europe's second-largest automobile manufacturer, after Germany's Volkswagen, overtaking rival French firm Renault.

Shares in GM fell 0.8 per cent in New York after disclosing that it will take a charge of up to US$4.5 billion mostly due to pension expenses associated with the transaction.

In Asia, Tokyo stocks fell and the safe-haven yen advanced after North Korea fired four missiles - three of them landing in Japanese waters - fueling fresh geopolitical concerns.

Japan Prime Minister Shinzo Abe warned the threat from North Korea had "entered a new stage" following the missile launch, which came after Pyongyang fired a rocket last month.

But Asia's other markets started the week with gains after another positive lead from Wall Street and remarks by Federal Reserve boss Janet Yellen signaling US interest rates could rise this month as the economy continues to improve.

Hong Kong stocks rose 0.2 per cent and Shanghai finished 0.5 per cent higher.

AFP

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