The Latest: European stocks close down amid world volatility
The Latest: European stocks close down amid world volatility
The Associated Press
Feb. 09, 2016
LONDON (AP) — The latest on the turmoil afflicting global financial markets (all times local):
European stock indexes have closed lower, adding to recent losses amid heightened market volatility around the globe.
After opening higher, European stocks turned down, with Britain's FTSE 100 shedding 1 percent to 5,623.19. Germany's DAX fell 1.1 percent to 8,879.40 while France's CAC 40 slid 1.7 percent. Greece's main index, which plunged almost 8 percent on Monday, shed another 2.9 percent.
Markets have become jittery as investors worry about a litany of issues, from China's economic slowdown to the plunge in oil prices, banks' finances and potential recessions in emerging markets.
The governor of the Bank of France, Francois Villeroy de Galhau, claims the volatility in financial markets is "excessive."
He met in Paris on Tuesday with his German counterpart, Jens Weidmann, along with the finance ministers of France and Germany for an economic conference.
Weidmann said "the volatility of the financial markets that we are observing now expresses uncertainties in terms of cyclical risks .... We think that this volatility of the Asian markets has spread to Europe, the eurozone, and the whole world."
Villeroy de Galhau said the long-term outlook for Europe is brighter despite the market volatility.
He added: "Of course, there are risks of decreasing growth in the eurozone but all the recent indications show that the recovery is here."
Who said Greece wasn't a concern in markets anymore?
Greece's stock market has fallen to its lowest level since 1989 while the country's borrowing rates in the bond markets have spiked up to levels last seen during the more acute phases of its crisis.
With the government struggling to agree on a pensions reform package with creditors and the unions angry at the latest batch of austerity measures, there are renewed fears over the bailed-out country's economic outlook.
That's reflected in the markets. The main Athens index was down 2.5 percent at 452.70. Earlier it fell as low as low as 439.08, its lowest level since Sept. 1989, according to financial information firm FactSet.
Meanwhile, the yield on Greece's benchmark bond was up 0.50 percentage point at 10.63 percent. Compare that with Japan's rate, which earlier Tuesday turned negative for the first time ever.
Wall Street has confounded predictions, with U.S. stock markets rising slightly after a weak opening.
In early trading after the bell, both the Dow Jones industrial average and the broader S&P 500 index were up 0.1 percent. Futures markets were predicting sizeable losses at the open following another down day in global stock markets.
Japan's Nikkei 225 index was the feature faller, ending 5.4 percent lower. Its woes weighed on Europe's stock markets, too. The Stoxx 50 index of leading European shares was trading 1.8 percent lower near 2-1/2 year lows at 2,621.
Confidence in the global economy remains "strikingly low," according to FXTM research analyst Lukman Otunuga.
The selling pressure across Europe's stock markets has intensified, with worries over the health of the region's banks at the forefront of investor concerns.
Having shown some resilience at the open despite the earlier 5.4 percent slide in Japan's main index, European markets were decidedly lower in afternoon trading.
The Stoxx 50 index of leading European shares was down 1.7 percent at 2,620 and near 2-1/2 year lows.
Italy's benchmark was one of the worst-performing indexes, trading 2.3 percent lower. Michael Hewson, chief market analyst at CMC Markets, says the "solvency of Italy's banks has also been a continuous source of concern" and that the skepticism is "well-founded."
The country's biggest bank by assets, UniCredit, was down 4.3 percent.
One sign the global economy is not as healthy as many had hoped has been the collapse in the price of oil.
According to the International Energy Agency, oil prices will continue to come under pressure as supply is set to outpace demand this year.
The organization, which advises countries on energy policy, said in its monthly report that global excess supply may reach 2 million barrels per day during the first quarter, and a further 1.5 million barrels a day in the second quarter.
"If these numbers prove to be accurate, and with the market already awash in oil, it is very hard to see how oil prices can rise significantly in the short term," the IEA said.
After heavy losses Monday, the U.S. benchmark for crude was up 50 cents at $30.19 a barrel.
The recovery in Europe's stock markets is fading as futures markets predicted a lower opening on Wall Street.
Having managed to eke out some gains on the open despite the big 5.4 percent drop on Japan's main stock index, European shares turned lower.
The Stoxx 50 index of leading European shares was down 0.4 percent at 2,657 and near 2-1/2 year lows. And futures markets were predicting a 0.3 percent fall at the open for both the Dow and the S&P 500.
Neil MacKinnon, global macro strategist at VTB Capital, said global equities have lost a staggering $6 trillion since the start of the year.
Back in January, he said it was concerns over China and the slump in the oil price that was behind the slide. Now, he said, there are worries that "another banking crisis might be brewing."
Perhaps more remarkable than the 5.4 percent reverse posted by Japan's main stock market was the news that the interest rate on the country's benchmark 10-year bond became negative for the first time ever.
The yield on the bond fell by 0.05 percentage points to minus 0.03 percent. What that means is investors are willing to pay for the right to lend money to Japan over that time period. One reason they might do so is because Japanese bonds are considered safe.
By contrast, the equivalent bond rate for the U.S. is 1.75 percent, also very low in historical terms.
The yields on Japan's bonds have been low for years as the country kept its interest rates at or near zero. Last week, the Bank of Japan cut one of its key rates into negative territory and that's pushed down the yields payable on its bonds.
The Japanese yen, like gold, has also been strengthening in recent days as it too benefits from its supposed safe haven status.
That's likely to worry economic policymakers in the country who hope a lower yen will help economic activity and lift inflation. A lower yen makes Japanese exports more competitive in international markets as well as raising the cost of imported goods.
Fears of a strengthening currency were largely behind the earlier stock market retreat in Tokyo.
Alastair McCaig, market analyst at IG, said the "last thing the Bank of Japan wants is the yen strengthening against the dollar."
On Tuesday, the dollar was down 0.2 percent at 115.35 yen. As recently as the end of January, the dollar was trading above 121 yen.
Not all financial assets are suffering during this tumultuous start to 2016.
Though stock markets around the world may be experiencing one of their most prolonged downturns since the global financial crisis of 2008, other financial assets are enjoying strong gains.
Gold has been on the rise as the precious metal benefited from its perception among investors as a safe haven. On Monday, it rose to just shy of $1,200 an ounce, its highest level since last June.
The steadier tone in European markets on Tuesday has seen gold retreat slightly. It's down about $8 at $1,190.
Banks have been at the forefront of the selling pressure in Europe in recent days as investors worry about their ability to deal with a worse-than-anticipated global economic outlook.
On Tuesday, many of those stocks recouped some of the losses sustained the previous day. Germany's Deutsche Bank was up 1 percent while France's BNP Paribas was flat. However, Italy's UniCredit was down again as fears over the scale of bad loans in the country's banking sector remain.
Neil Mackinnon, global macro strategist at VTB Capital, said the trading week has started with a firm "risk-off" mood, with European banks in the spotlight given high levels of non-performing loans, especially among the Italian banks.
Stock markets in Europe have managed to eke out some gains despite an earlier slide in Japan's main index, the latest in a series of dramatic moves in global financial markets.
Having started in the red, European shares pushed higher and the Stoxx 50 index of leading European shares was up 0.7 percent at 2,584. Most of Europe's main indexes were trading higher.
Earlier, Japan's main Nikkei 225 stock average ended 5.4 percent lower as renewed jitters about the global economy set off a wave of selling in banking stocks.
Investors around the world are worrying about a number of issues, including the fall in the price of oil to multi-year lows, the scale of the slowdown in China and whether many parts of the global economy will fall back into recession and suffer a debilitating period of deflation, or falling prices.