Global stocks experienced a decline on Friday, despite easing concerns over bank loans and the US-China trade war. US President Donald Trump announced that he will hold talks with China’s Xi Jinping during the upcoming APEC summit in South Korea, which helped to alleviate some of the concerns that had driven markets down the previous week. Trump had previously threatened to impose 100-percent tariffs on China over its rare-earth export controls, but in a recent interview, he stated that such tariffs were “not sustainable.”
The comments from President Trump helped to lift equities off their lows, according to Chris Beauchamp, Chief Market Analyst at IG. However, sentiment had soured on Thursday after two regional US banks disclosed issues with loans, sparking a sell-off in banking stocks. Fawad Razaqzada, market analyst at City Index and Forex.com, noted that credit risk in US regional banks has added to the list of growing worries, along with ongoing trade war uncertainty between the US and China, sluggish global growth, and stretched valuations.
Wall Street’s main indices were unable to hold onto early gains, despite shares in regional banks recovering somewhat following the sell-off. Investors have been nervously watching the US banking sector since parts company First Brands and subprime lender Tricolor filed for bankruptcy in September. Zions Bancorp shares were up 3.4 percent on Friday after having plunged 13.1 percent the previous day, while those of other regional banks also recovered some of their losses.
In Europe, the main indices fell, with bank shares taking a hit. Deutsche Bank shares slumped six percent, while French bank Societe Generale shed nearly five percent and Britain’s Barclays dropped 5.7 percent. Hong Kong and Shanghai dropped more than two percent, and Tokyo also closed lower. The bank worries sent safe-haven gold to another record, and led investors to pile into government bonds.
The ongoing government shutdown in the US has delayed the release of key economic data used by the Federal Reserve to decide on policy, adding to the unease. However, expectations that the Fed will cut interest rates at least once more this year have given traders some support. The Argentine peso depreciated against the dollar on Friday as legislative elections approach later this month, despite the US doubling its support for the currency to $40 billion.
As of 1530 GMT, key figures showed the New York Dow up less than 0.1 percent, while the S&P 500 and Nasdaq Composite were down 0.2 percent and 0.5 percent, respectively. The London FTSE 100 was down 0.9 percent, while the Paris CAC 40 and Frankfurt DAX were down 0.2 percent and 1.8 percent, respectively. The Tokyo Nikkei 225, Hong Kong Hang Seng Index, and Shanghai Composite were all down, with the euro and pound falling against the dollar.