Financials stocks drag on market after Deutsche Bank fine
The possibility of a $14 billion (nearly Rs 93,138.5 crore) fine for Deutsche Bank and a slide in oil prices hit financials and energy stocks on Friday, leading major global stock indexes lower.
US data showing a strong increase in consumer prices last month bolstered expectations that the US Federal Reserve will raise interest rates later this year, helping send US Treasury yields and the dollar higher.
Stocks fell as investors dumped shares of banks in North America and Europe after the US Department of Justice proposed Deutsche Bank pay $14 billion to settle an investigation into its selling of mortgage-backed securities.
Deutsche Bank, whose shares dropped roughly 8.5%, said it would fight the demand.
MSCI's world stocks index was down 0.49% and notched its second straight weekly loss.
Energy shares fell as crude oil prices slid by up to 2% to multi-week lows after swelling Iranian exports reinforced fears of a global glut.
Brent crude settled down 82 cents, or 1.76%, at $45.77 a barrel, while US crude settled down 88 cents, or 2%, at $43.03.
While traders have all but ruled out the possibility of the Fed raising interest rates at its meeting on Tuesday and Wednesday, residual doubts and questions about when the US central bank may finally pull the trigger hurt sentiment on Wall Street.
The uncertainty over next week's Fed meeting as investors tweak their portfolios ahead of the next interest rate hike weighed on the market according to Jeff Carbone, co-founder of Cornerstone Financial Partners in Charlotte, North Carolina.
The Dow Jones Industrial Average fell 88.68 points, or 0.49%, to close at 18,123.8, the S&P 500 lost 8.1 points, or 0.38%, to end at 2,139.16 and the Nasdaq Composite dropped 5.12 points, or 0.1%, to finish at 5,244.57.
The S&P energy index closed down 0.86% while the S&P financials index ended down 0.91%.
European shares posted their worst weekly performance in three months. Europe's broad FTSEurofirst 300 closed down 0.79% on the day.
US Treasury yields, meanwhile, rose after the stronger-than-expected inflation data.
Benchmark 10-year notes were up 4/32 in price to yield 1.6891%, down from 1.703% on Thursday but slightly higher than the 1.67% before the inflation figures.
The so-called core consumer price index (CPI), which strips out food and energy costs, increased 2.3% in the 12 months through August, above the Fed’s target of 2% annual inflation.
The uptick in inflation is likely to be welcomed by Fed officials when they meet next week to deliberate on monetary policy.
"It certainly is another thing that could help them increase their trend toward normalisation," said Mary Ann Hurley, vice president in fixed income trading at D A Davidson in Seattle.
Futures traders are pricing in a 51.8% chance the Fed will raise rates at its December meeting, up from 47.5% on Thursday, according to the CME Group's FedWatch Tool.
The US dollar hit a more than two-week high against a basket of major currencies after the inflation data boosted bets the Fed would turn more hawkish.
The dollar index, which measures the greenback against a basket of six major currencies, was up 0.81% to 96.059.
Spot gold prices slid 0.25% to $1,310.50, a two-week low.