European stocks stable after mixed world economic news

European stock markets closed virtually unchanged yesterday amid mixed world economic data after dipping earlier in the session over fresh concerns about the state of Europe’s banking sector.

London’s FTSE 100 index closed just 0.14 per cent higher at 5,501.64 points, while the CAC 40 in Paris also edged up 0.10 per cent to 3,725.82.

Meanwhile the Frankfurt Dax dipped 0.11 per cent to 6,214.77 points.

Shares in Germany’s biggest lender, Deutsche Bank, plunged 4.64 per cent to €47.70 after the Financial Times said the lender would need to raise up to €9 billion to bolster its capital.

Global banking regulation chiefs are set to meet on Sunday to approve new capital and liquidity measures drawn up by the Basel Committee on Banking Supervision – a move that could force banks to boost their capital.

“The news that Deutsche Bank is set to announce a rights issue next week sparked renewed concerns about the health of the European banking sector,” said Valentin Marinov, an analyst at US lender Citi.

Bank stocks helped push down other European exchanges including the Ibex-35 in Madrid where Santander fell 0.06 per cent to €9.919, BBVA inched down 0.10 per cent to €10.03 and Bankinter dropped 1.19 per cent to €5.39.

The Madrid index overall was down 0.22 per cent, the FTSE Mib in Milan slipped 0.12 per cent while the Zurich SMI gained 0.66 per cent.

Wall Street was mixed, with the Dow Jones Industrial Average up 0.08 per cent and the tech-heavy Nasdaq index down 0.22 per cent in afternoon trading.

“Buyers and sellers do not have a strong conviction to act until some of the uncertainties clear or time passes and sentiment shifts,” Scott Marcouiller, an analyst at Wells Fargo, said in a note.

The euro shrugged off the Deutsche report, rising to $1.2721 from $1.2697 late on Thursday. The dollar dipped to ¥84.11 from €83.85.

But Ulrich Leuchtmann, an analyst at Germany’s Commerzbank, said that tighter regulation for banks leading to considerable capital requirements could create “an uncomfortable environment for the euro”.

Meanwhile Japan’s first bank failure in seven years occurred yesterday as the private Incubator Bank of Japan was ordered to halt operations and filed for bankruptcy.

Government officials stressed that the move would have little impact on the Japanese financial system.

Asian stock markets mostly closed higher yesterday as traders welcomed positive trade data out of the United States, Japan and China.

Tokyo added 1.55 per cent to 9,239.17 points. Hong Kong rose 0.43 per cent, Shanghai gained 0.26 per cent, while Sydney slid 0.48 per cent.

Japanese sentiment was stoked after the government said the economy expanded more than initially thought in the second quarter, soothing fears that a recovery was shuddering to a halt.

Gross domestic product grew an annualised 1.5 per cent in the April-June quarter, well above an initial estimate of 0.4 per cent and in line with economists’ forecasts as firms ramped up capital spending, data showed.

In the United States, the trade deficit dropped more than expected in July as exports reached their highest level in two years.

In China meanwhile the trade surplus unexpectedly shrank in August as imports accelerated.