TSX, global stocks slip with crude — The Globe and Mail

The possibility of a $14-billion (U.S.) fine for Deutsche Bank and a slide in oil prices hit financials and energy stocks on Friday, leading most global stock indexes lower.

U.S. data showing a strong increase in August consumer prices bolstered those arguing for the Federal Reserve to raise interest rates later this year, helping send U.S. Treasury yields and the dollar higher.

Stocks fell as investors dumped shares of banks in North America and Europe after the U.S. Department of Justice proposed Deutsche Bank pay $14-billion to settle an investigation of its selling of mortgage-backed securities.

Deutsche Bank, whose shares dropped roughly 8.5 per cent, said it would fight the demand.

MSCI’s world stocks index was down 0.66 per cent, logging a second straight weekly loss.

Energy stock prices were cut by a drop in oil futures as rising Iranian exports and returning supplies from Libya and Nigeria fuelled concerns a global glut would persist.

Falling U.S. equity markets and a rising dollar also weighed on crude futures and other commodities denominated in the greenback.

“When oil goes down, investors get nervous about the risk of default in the energy patch,” said Thomas Wilson, senior investment manager at Brinker Capital in Philadelphia.

Brent crude futures settled down 82 cents, or 1.8 per cent, at $45.77 a barrel, hitting a two-week bottom of $45.48.

U.S. West Texas Intermediate crude futures fell 88 cents, or 2 per cent, to settle at $43.03 a barrel. WTI hit a five-week low of $42.74.

For the week, Brent fell 5 per cent, while WTI lost 6 per cent.

“Crude futures are taking on an increasingly bearish appearance,” said Jim Ritterbusch of Chicago-based oil markets consultancy Ritterbusch & Associates.

Canadian stocks fell to a second straight weekly loss, with energy producers retreating as crude slumped to the lowest in five weeks on concern additional supply will compound the global glut in oil.

The S&P/TSX Composite Index lost 0.36 per cent, or 52.74 points to 14,450.93 in Toronto, halting a two-day rally and sending it to a fourth weekly drop in the last five. The index has advanced about 2.5 per cent this quarter. That’s made Canadian stocks more expensive than U.S. peers, with a price-to-earnings ratio of 23 maintaining a 14-per-cent premium over the S&P 500 Index.

Energy producers and financial firms retreated at least 0.4 per cent, as nine of 10 industries in the S&P/TSX retreated.

Concordia International Corp. plunged 18.6 per cent, to the lowest level since 2013. In a statement commenting on a new bill introduced in the U.K. on Thursday to manage the cost of medicines, the company reaffirmed its 2016 forecast and noted it believes it has access to sufficient financial resources to manage its liabilities.

Concordia will also be removed from the S&P/TSX benchmark at the close Friday, according to a statement from S&P Dow Jones Indices. The struggling drugmaker in August unexpectedly cut its 2016 forecast, suspended its dividend and announced its chief financial officer was leaving.

In New York, the Dow Jones industrial average fell 89.30 points, or 0.49 per cent, to 18,123.18, the S&P 500 lost 8.15 points, or 0.38 per cent, to 2,139.12 and the Nasdaq Composite dropped 5.12 points, or 0.1 per cent, to 5,244.57.

Both the S&P energy index and S&P financials index were down 0.9 per cent.

European shares posted their worst weekly performance in three months. Europe’s broad FTSEurofirst 300 index closed down 0.79 per cent on the day.

U.S. Treasury yields, meanwhile, fell even as data showed U.S. consumer prices increased more than expected in August, pointing to a steady build-up of inflation.

Benchmark 10-year notes were last up 1/32 in price to yield 1.7013 per cent.

The so-called core CPI, which strips out food and energy costs, increased 2.3 per cent in the 12 months through August, above the Fed’s target of 2-per-cent annual inflation.

The uptick in inflation is likely to be welcomed by Fed officials when they meet next Tuesday and Wednesday to deliberate on monetary policy.

“It certainly is another thing that could help them increase their trend toward normalization,” said Mary Ann Hurley, vice president in fixed income trading at D.A. Davidson in Seattle.

Futures traders are pricing in a 51.8-per-cent chance the Fed will raise rates at its December meeting, up from 47.5 per cent on Thursday, according to the CME Group’s FedWatch Tool.

While the inflation data pushed the dollar to a more than two-week high against a basket of major currencies, uncertainty ahead of a Bank of Japan policy meeting on Wednesday limited the dollar’s gains against the yen.

The dollar index, which measures the greenback against a basket of six major currencies, was up 0.82 per cent to 96.066 and the greenback strengthened 0.2 per cent versus the Japanese currency.

Spot gold prices slid 0.4 per cent to $1,308.48, a two-week low.

With files from Bloomberg News

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