World stock markets mostly fall amid renewed worries about health of Europe’s banks

Tuesday, September 7, 2010

World stocks fall amid renewed Europe bank worries

LONDON — World stocks fell Tuesday, particularly in Europe, where concerns about the health of banks resurfaced and EU finance ministers created new financial oversight bodies but failed to agree on a bank or trading tax.

A report in the Wall Street Journal claimed the EU stress tests of 91 banks in July understated some lenders’ holdings of potentially risky debt. Meanwhile, the Financial Times said Germany’s top ten banks will have to raise as much as €105 billion ($135 billion) to meet new capital requirements.

Britain’s FTSE 100 index closed down 0.6 percent at 5,411.69 and Germany’s DAX fell 0.6 percent to 6,122.34. France’s CAC-40 shed 1.1 percent to 3,645.77.

Losses in Asia were more modest but Wall Street opened lower after being closed Monday for the long Labor Day holiday weekend. The Dow industrials average was down 0.7 percent at 10,371.34 and the Standard & Poor’s was 0.9 percent lower at 1,094.82.

President Barack Obama’s announcement of a new $50 billion jobs program failed to provide much support to markets. Instead, the Wall Street Journal report weighed on bank stocks. Societe Generale shares were down 3.9 percent and BNP Paribas 2.3 percent.

Barclays, which said its investment bank chief Robert Diamond would become CEO next year, saw its shares slide 2.6 percent. HSBC, which separately announced the retirement of its chairman, was flat.

Although worries of a double-dip recession eased after last week’s publication of U.S. jobs figures, which were not as dire as feared, investors remain tense. EU finance ministers, who were meeting in Brussels, acknowledged that despite the improvement in economic indicators in recent months, the recovery is still fragile and uneven.

“We are certainly not out of the woods yet,” said Olli Rehn, European Commissioner for Economic and Monetary Affairs.

The union’s 27 finance ministers agreed to create new financial oversight institutions, including a systemic risk board chaired by European Central Bank president Jean-Claude Trichet. But they failed to find common ground on a levy on banks or on a new tax on financial trading.

In Asia, Japan’s benchmark Nikkei 225 stock index declined 75.32 points, or 0.8 percent, to 9,226.00 amid continued strength in the yen, which eats into profits of the country’s crucial exporters. Japan’s central bank voted Tuesday to keep interest rates near zero, holding off on further measures to tackle a strong yen that is undermining a fragile economic recovery.

Hong Kong’s Hang Seng added 0.2 percent to 21,401.79 while South Korea’s Kospi edged lower by 0.3 percent to 1,787.74. Australia’s S&P/ASX 200 fell 0.1 percent to 4,573.20.

Markets in Singapore, Taiwan and Malaysia also fell while India and Indonesia gained.

In currencies, the dollar slipped to 83.79 yen in Tokyo from 84.11 yen in London. The euro declined to $1.2712 from $1.2833.

Benchmark crude for October delivery was down $1.72 to $72.88 a barrel in electronic trading on the New York Mercantile Exchange.

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