European stock markets struggled and Wall Street looked set to open lower on Monday after US bank Morgan Stanley reported a slump in quarterly profit, adding to signs of woe among the world’s biggest banks.
The record third-quarter loss reported by Germany’s Deutsche Bank earlier this month has refocused investors’ minds on the big global banks after a decade of financial strife, regulation and technology-driven change. US banks have gained market share in that time but of the major players to have reported in the third quarter, only Wells Fargo & Co, the biggest mortgage lender, managed a rise in revenue and income from interests on loans.
Morgan Stanley’s profit plunged 42 per cent, capping a generally downbeat quarter for big US banks after investors fled the bond, currency and commodity markets. “The Morgan Stanley numbers did not help, and the market is just a little disappointed that there were no immediate stimulus measures coming out of China,” said Berkeley Futures’ associate director Richard Griffiths. European and Asian stocks had climbed earlier after slightly better than expected Chinese growth numbers allayed months of worry over the slowdown in the world’s second-largest economy. While monthly industrial output numbers were poor and the third quarter growth figure was the weakest since the 2008 financial crisis, the 6.9 percent reading just beat a forecast for 6.8 per cent and suggested official efforts to stimulate the economy were working. “The market has been beset with worries and actually things are not so bad,” said Andy Sullivan, a portfolio manager with Swiss investment firm GL Financial. “Although the start of the Q3 results have been messy, there are enough positive signs on earnings growth to keep markets positive. The world is not ending, things are more or less on track.”
The FTSE Eurofirst index of leading European shares was roughly flat while Wall Street futures pointed to a 0.3 per cent loss on opening. The tremors emanating from a market slide in China and a devaluation of the yuan currency in the summer appear to have largely settled.
While Japan’s Nikkei fell almost 1 per cent on Monday and Shanghai was marginally in the red at closing, MSCI’s broadest index of Asia-Pacific shares outside Japan is on course for its best month in more than three years. Adding to optimism are growing bets that the US Federal Reserve will delay its first rate hike since 2006 until next year, encouraging investors to hunt for bargains in beaten-down Asian equities. “The market is turning optimistic, against a backdrop of ample liquidity,” said Yang Hai, strategist at Kaiyuan Securities.
The dollar inched higher against a basket of other major currencies, with all eyes on a European Central Bank meeting later this week, expected to offer some hint of more stimulus for the economy that may weaken the euro. The euro fell 0.1 per cent to $1.1333, down from last Thursday’s high of $1.1495. Brent crude prices were down around 2 per cent, extending a week of declines to dip back under $50 a barrel.
Reuters
