China, Europe drag world
stocks lower; dollar slips
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[May 19, 2014] By
Europe and Asia dragged world equity markets lower on
Monday as concerns about slower growth in China prompted
investors to cut their risks.
The dollar slipped against major currencies after expectations for
continued monetary support from the Federal Reserve kept the
benchmark 10-year yield near last month's six-month low.
Shanghai shares hit a three-week low as Beijing unveiled new
regulations that tighten its grip on interbank lending to defuse
risks among "shadow" non-bank financial firms that act like banks.
Fresh data also added to evidence of a cooling property market.
"Markets think any weakness (in the Chinese economy) from here will
be met with policy response from the authorities," said Manik Narain,
strategist at UBS. "But there is room for China to disappoint so
far. Weakness has been limited."
The benchmark MSCI world equity index <.MIWD00000PUS> fell 0.1
percent while European shares <.FTEU3> lost 0.4 percent.
Emerging stocks <.MSCIEF> outperformed their developed counterpart
by rising 0.3 percent, approaching last week's 6-1/2 month high.
The dollar fell 0.1 percent <.DXY> against a basket of major
currencies while the euro ticked higher.
NO STRAIGHT LINE
European shares were dragged lower by British pharma group
AstraZeneca <AZN.L>, which fell more than 13 percent after it
rejected a sweetened "final" offer from Pfizer <PFE.N>.
Deutsche Bank <DBKGn.DE> fell more than 2 percent after the lender
unveiled plans to raise 8 billion euros ($11 billion) in new
capital, in its third capital increase since 2010.
Deutsche's cap hike gives it the firepower for the investment
banking push, especially in the United States, after a retreat by
competitors Barclays <BARC.L>, UBS <UBSN.VX> and others left a gap
that it aims to fill.
But it also underscores how the bank fell short of its ambitious
turnaround targets and how burdensome fines and settlements and
lagging profitability have hampered management's efforts to fortify
capital by retaining earnings.
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European shares have been rallying in recent weeks on expectations
that the European Central Bank would cut interest rates to support
"It's not going to be a straight-line recovery and people will lose
confidence in it at times," Richard Marwood, senior investment
manager at AXA Investment Management, said.
"But you've got a safety net (from central banks) and I still think
the stocks market is a better place to be than the bond market."
The 10-year Irish government bond yield fell towards last week's
record low after Moody's upgraded Ireland's credit rating by two
notches to Baa1.
"Ireland has come from being one of the weakest countries in the
euro zone...but now in an upwards rating cycle, Ireland should do
better than its current peers," said Peter Schaffrik, head of
European rates strategy at RBC.
German Bund futures rose 2 ticks.
U.S. crude oil fell 0.6 percent to 102.65 a barrel.
(Additional reporting by Sujata Rao, John Geddie and Francesco
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