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(Correcting that oil-producing countries are meeting in Algiers)
LONDON (Alliance News) - Stocks in London ended lower on Tuesday, erasing gains seen at the open after the first debate between the two US presidential candidates, as doubts about the health of Deutsche Bank and the ongoing meeting of oil-producing countries in Algiers spread caution across the market.
The FTSE 100 ended 0.2% lower, or 10.37 points, at 6,807.67. The FTSE 250 fell 0.5%, or 94.09 points, at 17,628.71, and the AIM All-Share finished down 0.2%, or 1.43 points, at 815.25.
The UK BATS 100 index ended off 0.3% at 11,536.00, the BATS 250 closed down 0.6% at 16,067.03, and the BATS Small Companies index down 0.5% at 11,088.90.
The long-awaited US presidential debate covered both Democrat Hillary Clinton's and Republican Donald Trump's economic policies, race relations, the war against Islamic State, and international ties.
"The market's initial response to the US presidential election debate overnight was a clear sigh of relief," said FOREX.com analyst Fawad Razaqzada. The analyst said the gains were then rapidly reversed "as traders were quick to take profit, knowing full well that a TV debate may not necessarily impact the outcome of the actual votes in a meaningful way".
Trump appeared confident initially as he discussed his opposition to trade deals, his views on race relations and fighting crime. When the debate shifted to foreign policy, Clinton took control and seemed to frequently bait Trump despite his repeated attempts to interrupt. Clinton was seen as coming out on top in the debate, according to a CNN/ORC poll of debate watchers.
The initial rally, dubbed the "No-Trump jump" by CMC Markets analyst Jasper Lawler, faded during the morning, amid continued concerns about Deutsche Bank.
News magazine Focus reported on Monday that German Chancellor Angela Merkel had decided against any diplomatic intervention on behalf of the Frankfurt-based lender in its legal disputes with US authorities. The bank later looked to reassure markets by rejecting the claim it had sought a government bailout, with a spokesman saying that the bank's chief executive, John Cryan, had "at no point" asked Merkel to intervene.
Responding to the media report, Merkel's spokesman Steffen Seibert said that the government hoped for "a fair result" in settling the bank's US legal troubles, adding that "there is no reason for speculation".
Deutsche Bank's stock had already nosedived in Frankfurt earlier this month after the US Department of Justice called on the bank to pay USD14 billion to settle a fraud investigation involving the sale of mortgage-backed securities in the run-up to the 2008 financial crisis.
The DAX 30 index in Frankfurt fell 0.3% on Tuesday, with Deutsche Bank shares recovering from earlier losses, ending flat. The German lender's shares are down 53% so far in 2016, while the DAX has only lost 3.7%.
"This is beginning to feel like a crescendo period and if they are having funding and capital requirement issues, this could have major consequences for various Spanish and Italian banks," noted Jordan Hiscott, chief trader at ayondo markets. "The question on many people's lips now is: could this be the next Lehman Brothers?"
The latest reports about Deutsche Bank hit London-listed banking stocks on Monday and continued to put pressure on them on Tuesday, with Royal Bank of Scotland ending down 2.1% and Barclays down 0.9%.
Standard Chartered ended as one of the worst blue-chip performers, down 3.1%. The US Justice Department is investigating the UK lender over allegations that an Indonesian power company controlled by the London-based bank paid bribes to win contracts, the Wall Street Journal reported, citing people familiar with the investigation.
The CAC 40 index in Paris ended 0.2% lower.
The ongoing International Energy Forum taking place in the Algerian capital of Algiers since Monday represented another matter of caution among investors. Crude prices are experiencing volatility recently as OPEC members are expected to meet on the sidelines of the meeting, which will run until Wednesday, amid continued rumours of a freeze in oil production.
Brent oil futures surged on Monday amid speculation that Russia will join OPEC nations in curbing production if the cartel can reach an agreement. The North Sea benchmark was quoted at USD47.29 at the European equities close on Monday. However, Brent stood at USD45.69 at the close on Tuesday.
Razaqzada commented: "Both Iran and Saudi oil ministers have suggested that [a deal] could potentially be signed later on in the year. Iran is pushing for more market share as it tries to reach its pre-sanction levels while Saudi is willing to cut its output now, knowing that it has probably reached peak capacity and ahead of lower seasonal demand in the final months of the year."
Despite caution in the market, the gold price did not benefit from its safe-haven condition, as it found resistance in a strong dollar. The precious metal was quoted at USD1,327.61 an ounce at the close, compared to USD1,340.84 an ounce on Monday.
The pound stood at USD1.2988 at the equities close against USD1.2974 on Monday, while the euro was quoted at USD1.1196 compared to USD1.1275 on Monday.
In the US, stocks were higher at the European equities close, with the Dow Industrials up 0.5%, the S&P 500 up 0.4%, and the Nasdaq Composite up 0.6%.
US investors were partly reacting to better-than-expected Purchasing Manager's Index readings published by Markit. The preliminary services reading came in at 51.9 in September, above the 51.0 seen in August and expectations for a 51.1 score.
Consumer confidence in the US also improved in September. The Conference Board said its consumer confidence index jumped to 104.1 in September from an upwardly revised 101.8 in August. Expectations were for a decline to 99.8.
Elsewhere on the London Stock Exchange, Royal Dutch Shell 'A' shares fell 2.1%. Several media outlets reported that Shell has been forced to shut a key oil pipeline in Nigeria that feeds the country's strategic Bonny export terminal.
Fox News cited Shell spokesman Precious Okolobo as stating the Trans Niger Pipeline was shut down Monday to investigate a fire, but said the company had refused to comment on reports that militants bombed its Bonny crude pipeline Friday, crippling exports days after they resumed following months of repairs from a bomb attack in May.
Wolseley fell 4.1%. The building materials supplier reported increases in both profit and revenue during its recently completed financial year, though it noted there will be job cuts in its UK division. The group announced a turnaround and re-positioning strategy in its UK division, with 80 branches and one distribution centre to be closed, resulting in up to 800 job losses.
At the other end of the index, Carnival rose 3.8%. The cruise operator on Monday had reported growth in profit in the third quarter of its financial year, and said it is on track to deliver 25% earnings growth in the full year. It said revenue during the peak summer season was bolstered by strong performances in both its North American and European brands, and across all major deployments including the Caribbean, Alaska, and Europe.
Pay-TV company Sky ended 1.3% higher, after it was upgraded to Buy from Hold by Keppler Cheuvreux, according to traders.
In the FTSE 250 index, Card Factory rose 1.8%. The greeting card and gifts retailer reported growth in profit in the first half of its financial year on higher revenue, and said it is on track to meet full-year expectations. It said its results were boosted by improvements in the quality and range of both card and non-card categories, with good ongoing growth in average spend.
Highlights in the UK corporate calendar Wednesday are full-year results from Smiths Group, whilst J Sainsbury, PZ Cussons, and Stagecoach Group release trading statements. Ebiquity and AA publish half-year results.
In the economic calendar, Germany's Gfk consumer confidence survey is at 0700 BST. In the US, MBA mortgage applications data are at 1200 BST. The EIA crude oil stocks data are at 1530 BST.
At 1430 BST, European Central Bank President Mario Draghi speaks on "current developments in the euro area" at Deutsche Bundestag in Berlin, Germany.
At 1500 BST, US Federal Reserve Chair Janet Yellen gives a semi-annual testimony on Fed supervision and regulation of the financial system before the House Financial Services Committee.
By Daniel Ruiz; danielruiz@alliancenews.com
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