Stock markets turn bearish due to news Deutsche Bank may be bailed out

KUWAIT, Oct 2 (KUNA) -- Financial markets, last week, revolved around the Organization of Petroleum Exporting Countries meetings. The OPEC members announced that they agreed to the outline of a deal that will cut production for the first time in eight years, surprising traders who had expected a continuation of the pump-at-will policy the group adopted in 2014. Still, many of the details remain to be worked out and the group would not decide on targets for each country until its next meeting at the end of November. Although sentiments were lifted following the OPEC announcement and the jump in oil, news that the German lending giant Deutsche bank might need to be bailed out by the government undermined risk appetite across global markets pushing stocks and treasury yields lower, according to a detailed report issued by the National Bank of Kuwait (NBK) on Sunday.
Reports showed that the global bank is in need to shore up its capital to face a reportedly $14 billion in penalties to be paid to the US Department of Justice regarding dealings in mortgage backed securities. The 10-year German bund and 10-year US treasury yield dropped to -0.155% and 1.543% respectively. The US Dollar range traded for the majority of last week between 95.253 and 95.722, making it clear that traders failed to find a clear direction for the greenback. However, at the end of the week the greenback found support against most of its counterparts amid better than expected economic data to close the week higher after reaching 95.836 on Friday.
Oil managed to jump 7% amid the OPEC's announcement to cut production. However, prices dropped slightly on Friday as investors took profit, following doubts that the production cut would make a substantial effect on the current global oil glut. On Friday, Brent and WTI crude traded at 48.67 and 47.47 respectively.
Mixed Data from the Housing Market Contracts to purchase previously owned US homes fell to a seven-month low in August, held back by tight supply in the housing market, the National Association of Realtors said Thursday in Washington.
The fall in contract signings was the third in four months, adding to signs that a relative paucity of available homes is holding back the market. Recent data have shown that new U.S. home construction fell more than projected in August, while home prices are rising at a solid pace. Borrowing costs remain near historic lows while jobs and wages are gaining, factors that will continue to support housing.
U.S. consumer confidence in September rose to the highest level in nine years, a hopeful sign that economic growth will accelerate in coming months. The Conference Board said Tuesday that its consumer confidence index rose to 104.1, up from 101.8 in August. It was the strongest reading since the index stood at 105.6 in August 2007, four months before the beginning of the Great Recession of 2007-2009. Private economists had been forecasting the index would drop in September after a strong August reading. Many analysts expected that recent volatility in the stock market and some subpar economic readings on auto sales and manufacturing might lead consumers to feel less confident. They also thought that increased uncertainty revolving around the presidential campaign might weigh on consumers.
The U.S. economy expanded more in the second quarter than previously estimated, reflecting a smaller drag from business spending on structures and equipment.
Gross domestic product rose at a 1.4 percent annualized rate, compared with a prior estimate of 1.1 percent, Commerce Department figures showed Thursday. Gross domestic income, which reflects all the money earned by consumers, businesses and government agencies, was revised to show a 0.2 percent drop rather than a gain.
Households are doing the heavy lifting for the economy, making up for tepid business investment and lackluster demand from overseas. On the heels of robust hiring and nascent wage gains, consumer spending is projected again to drive growth in the third quarter.
"It's clearly been enough to carry us through," Scott Brown, chief economist for Raymond James Financial Inc. in St. Petersburg, Florida, said about household spending. "The U.S. economy is generally in good shape" for the second half even as "conditions around the rest of the world are still sluggish." Household consumption, which accounts for about 70 percent of the economy, was revised to 4.3 percent from a prior estimate of 4.4 percent. The upward revision to GDP also reflected a smaller drag from inventories and higher exports. Meanwhile, expectations in the market were for a 1.3% gain in GDP. (end) oj.rk