Tuesday, November 24, 2009 7:00 AM
Banks weigh on world markets after China warning
Globe and Mail Staff
World stock markets fell Tuesday following big gains on Monday, with China’s main index posting its biggest drop in three months after the country’s central bank warned commercial banks to control their lending.
European shares tracked their Asian counterparts lower, with the FTSE 100 index of leading British shares down 15.92 points, or 0.3 per cent, at 5,339.58 and Germany’s DAX 32.73 points, or 0.6 per cent, lower at 5,768.75. The CAC-40 in France was 25.52 points, or 0.7 per cent, lower at 3,787.65.
On Monday, Europe’s main indexes closed over 2 per cent higher amid further hopeful signs about the global economic recovery, particularly out of the U.S.
Wall Street is also poised to open lower after Monday’s gains of over 1 per cent. Dow futures were down 18 points, or 0.2 per cent, at 10,404 while the broader Standard & Poor’s 500 futures fell 1.5 points, or 0.1 per cent, to 1,102.30.
Financial stocks led the retreat in Europe after big gains on Monday, with Commerzbank AG down 2.5 per cent, making it the biggest faller on the DAX. Deutsche Bank AG was also down just under 2 per cent. Meanwhile, Switzerland’s UBS AG was down 2 per cent.
Sentiment towards the banks in Asia was dented by the warning from China’s central bank. As a result, China’s Shanghai index tumbled 115.14 points, or 3.5 per cent, to 3,223.53 – its biggest retreat in three months – as investors fretted over the warning. The index had been up 11.4 per cent so far this month.
The warning comes ahead of the government’s annual economic planning meeting and could foreshadow more measures to reduce liquidity in the months ahead.
In Britain, Lloyds Banking Group PLC shares rose even though it confirmed it is planning to raise a British record of £13.5-billion ($22.3-billion) via a rights issue in order to shore up its capital position and not take part in the government’s Asset Protection Scheme.
The rights issue has been priced at 37 pence, which is a 60 per cent discount to Monday’s closing share price.
Even so, Lloyds shares were up 1.4 per cent at just below 93 pence a share.
The retreat in Europe was cushioned somewhat by further encouraging economic data, which cemented market expectations that growth is picking during the fourth quarter.
Oil slipped towards $77 a barrel Tuesday as markets awaited data expected to show that the pace of U.S. economic recovery is slower than previously estimated.
By early afternoon in Europe, benchmark crude for December delivery was down 12 cents to $77.44 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose 9 cents to settle at $77.56 on Monday.
Gold prices steadied in Europe after hitting record highs in the previous session, as the dollar recovered some lost ground against the euro, relieving upward pressure on the precious metal.
