By Riva Gold
European bank shares wavered Friday after the U.S. moved to
settle crisis-era disputes and Italy set up a rescue fund for
troubled lenders.
Global stocks, bonds and currencies were otherwise locked in
narrow ranges as trading volumes continued to thin ahead of the
holidays.
Futures pointed to a 0.1% opening loss for the Dow Jones
Industrial Average, keeping it on track to end the week slightly
higher but still shy of the 20000 milestone.
The Stoxx Europe 600 was flat in afternoon trading, while the
banking sector fell 0.6% after initially rising as a flood of news
hit the region's lenders.
The U.S. Department of Justice moved to resolve its crisis-era
megabank mortgage cases, reaching multibillion-dollar settlements
with Deutsche Bank and Credit Suisse.
Shares of Deutsche Bank rose 1.2%, at one point hovering around
their highest level since March, after the Obama administration
struck a $7.2 billion settlement with Germany's biggest bank over
toxic securities.
Analysts said the news removed an element of uncertainty around
the broader banking sector, as shareholders earlier in the year had
worried about a much larger penalty.
"Knowing what these fines are going to be, that in itself is a
positive, " said Guy Miller, chief market strategist at Zurich
Insurance Group.
"You didn't know how big the fine was going to be, and the range
was huge," he said.
Shares of Credit Suisse Group reversed early gains to trade down
0.7%, however, after the Zurich-based lender said it had settled a
U.S. probe into its selling of mortgage-backed securities for about
$5.3 billion, a higher total settlement amount than analysts had
been expecting.
Barclays shares fell 0.9%, meanwhile, after the U.S. filed a
lawsuit against the bank alleging more than $30 billion in
fraud-tainted sales. The bank said it would seek the suit's
"dismissal at the earliest opportunity" and that it considered the
claims "disconnected from the facts."
In Italy, the FTSE Italia All-Share Banks index gained 1.2%,
even as Italy's stock market regulator suspended trading of Banca
Monte dei Paschi di Siena's ordinary shares, related derivatives
and 10 types of bonds.
The decision came after the bank said earlier Friday that it
would tap a government rescue fund to shore up its finances, having
failed to raise fresh capital from private investors.
"What happens in European banks matters in a global context,"
Mr. Miller said, pointing to their size and linkages across Europe
and the global financial system.
Elsewhere in markets, Brent crude oil fell 1% to $54.48 a
barrel, while copper futures dipped 0.4%, weighing on Europe's
energy and mining companies.
The euro edged up 0.1% against the dollar to $1.0446, while the
broader WSJ Dollar Index was flat.
10-year German bund yields fell slightly to 0.236% from 0.254%
Thursday, while the 10-year U.S. Treasury note edged down to 2.540%
from 2.550%. Yields move inversely to prices.
Yields on long-dated government bonds have risen sharply in the
second half of this year, particularly since the Nov. 8 election,
on expectations for faster growth, higher inflation and tighter
monetary policy.
"It's been almost a continual bull market in fixed income my
whole career, but it looks as if we see a turn here, if we see some
[fiscal] reforms and see inflation come through," said Rich Sega,
chief investment officer for North America at Conning.
While many investors are betting the rise in yields is likely to
continue through next year, "the big risk here is trade policy," he
said. "We don't know what the reality will be relative to the
rhetoric in the [presidential] campaign, but trade-policy rhetoric
has been very antigrowth," he said.
Earlier, shares mostly tilted lower in Asian trading hours, with
Hong Kong's Hang Seng Index down 0.3%, led lower by property and
bank shares. Shanghai stocks fell 0.9% and Australia shares shed
0.3%, while Japanese markets were closed for a holiday.
The moves came after U.S. stocks pulled back Thursday, as a
recent rally faded in low-volume trading ahead of the holidays.
Wall Street has climbed to fresh records since the U.S.
election, with the Dow on track for its seventh consecutive week of
gains. Still, momentum has slowed in recent sessions with the Dow
falling on Wednesday and Thursday.
For the next couple of years, "We can be reasonably optimistic
about growth...but we have to be careful about how high interest
rates rise and if inflationary pressures start to pick up," said
David Donabedian, chief investment officer at Atlantic Trust
Private Wealth Management.
"You have people now assuming there's going to be a substantial
fiscal stimulus package that's going to jolt to the economy...but
you could well have some wobbling in that positive investor
sentiment as the slow wheels of Congress turn," he said, noting
pro-growth policies could be delayed or watered down next year.
--Giovanni Legorano, Willa Plank, John Letzing and Jenny
Strasburg contributed to this article.
Write to Riva Gold at riva.gold@wsj.com
(END) Dow Jones Newswires
December 23, 2016 09:18 ET (14:18 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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