While you were sleeping: Financial shares slide

Thursday 13th November 2014

Wall Street fluctuated near record highs as a decline in financial shares amid concern about the prospect of additional fines from a foreign exchange manipulation probe offset optimism that the US economic recovery is progressing well.

In afternoon trading in New York, the Dow Jones Industrial Average edged 0.04 percent lower, while the Standard & Poor’s 500 Index fell 0.12 percent. The Nasdaq Composite Index rose 0.11 percent. Both the Dow and the S&P 500 closed at record highs on Tuesday.

"This is a pause,” Kim Forrest, senior equity research analyst at Fort Pitt Capital Group in Pittsburgh, told Reuters. “There hasn’t been any horrible news pressing down the market.”

In the Dow, declines in shares of JPMorgan Chase and those of Goldman Sachs, down 1.5 percent and 1 percent respectively, offset gains in shares of Nike and those of AT&T, up 0.9 percent and 0.7 percent respectively.

JPMorgan Chase and other financial shares retreated after global regulators fined six banks, including JPMorgan Chase, Citigroup and Bank of America, US$3.4 billion as part of an investigation into manipulation of foreign exchange markets.

“Many will see this as drawing a line under this sad episode,” Tim Dawson, an analyst at Helvea in Geneva who covers financial firms, told Bloomberg News. “We are less optimistic,” adding that the banks were “likely to face a heavy burden of potential litigation in coming years.”

In Europe, the Stoxx 600 finished the session with a 1.1 percent drop from the previous close. The UK’s FTSE 100 Index fell 0.3 percent, France’s CAC 40 shed 1.5 percent, while Germany’s DAX sank 1.7 percent.

“There’s a bit of uncertainty and Ukraine’s one element of it,” Veronika Pechlaner, who helps oversee US$2.3 billion at Ashburton, told Bloomberg News. “There’s also a bit of negative sentiment for the banking sector ahead of the G-20 meeting, where capital regulations will be discussed.”

The British pound dropped after the Bank of England downgraded its economic growth forecasts and warned inflation might slide below 1 percent, signalling the central bank might not raise its benchmark interest rate as soon as some had expected.

The central bank forecast the economy will grow 2.9 percent next year and 2.6 percent in 2016, down from August estimates for 3.1 percent and 2.8 percent respectively.

"A spectre is now haunting Europe, the spectre of economic stagnation, with growth disappointing again and confidence falling back," Bank of England Governor Mark Carney said in a statement.

Oil extended its slide after Saudi Arabia’s Oil Minister Ali al-Naimi offered investors little hope the global supply imbalance would improve anytime soon.

"Talk of a price war is a sign of misunderstanding, deliberate or otherwise, and has no basis in reality," Naimi told an event in the Mexican Pacific resort of Acapulco, Reuters reported.

BusinessDesk.co.nz

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