Markets falter on European bank concerns and Japan worries

AP News
Posted: Aug 02, 2016 7:59 AM
Markets falter on European bank concerns and Japan worries

LONDON (AP) — Worries over the financial health of Europe's banks and skepticism over the Japanese government's latest stimulus package weighed on global markets on Tuesday even though Australia's central bank delivered a rate cut.

KEEPING SCORE: In Europe, Britain's FTSE 100 fell 0.4 percent to 6,667 while Germany's DAX lost 1.4 percent to 10,190. France's CAC 40 was 1.6 percent lower at 4,339. U.S. stocks were poised for a lower opening too with Dow futures and the broader S&P 500 futures down 0.2 percent.

EUROPEAN BANK WORRIES: On Tuesday, bank stocks across Europe — even those that were effectively given a clean bill of health by the European Banking Authority's in last Friday's stress tests — fell sharply for the second day running. The falls aren't just confined to Italy, where concerns over the health of the banking sector have been the most acute. Britain's Barclays PLC was down 3 percent while Germany's Commerzbank slid 6.4 percent and Italy's UniCredit fell another 5.1 percent.

ANALYST TAKE: Michael Hewson, chief market analyst at CMC Markets in London, says the tests' findings failed to address many of the concerns investors have about the state of Europe's banks, including the rising costs they face for parking their cash at the European Central Bank. "Skepticism that the EBA bank stress tests painted a far too rosy picture of the health of Europe's banks while paying no account of the current negative rate environment nor for that matter the fiscal health of Portuguese and Greek banks," Hewson said.

JAPAN STIMULUS: Japan's Cabinet approved a fresh economic stimulus package worth more than 28 trillion yen ($275 billion). The latest measure by Prime Minister Shinzo Abe to get the stalling recovery back on track failed to excite despite his claim that it represents "an investment for the future." Japan's Nikkei 225 lost 1.5 percent to 16,391.45 as the yen rallied against the dollar.

AUSTRALIAN RATE CUT: The Reserve Bank of Australia cut its benchmark interest rate by a quarter of a percentage point to a record-low 1.5 percent on Tuesday, seeking to jolt the nation's sluggish economy amid low inflation rates. The board last cut rates in May, and economists had largely predicted Tuesday's cut. Australia's S&P ASX 200 ended 0.8 percent lower at 5,540.50.

ASIA'S DAY: South Korea's Kospi lost 0.5 percent to 2,019.70. China's Shanghai Composite Index edged up 0.6 percent to 2,971.28 while Hong Kong's stock market was closed due to a typhoon

OIL: Benchmark U.S. crude gained 53 cents to $40.59 after settling at $40.06 a barrel in New York on Monday. Brent crude, which is used to price international oils, rose 64 cents to $42.78 a barrel in London, after closing at $42.14 a barrel the day before.

CURRENCIES: The euro was up 0.3 percent at $1.1193 while the dollar fell 0.6 percent to 101.758 yen.