Investors cautious after US banks ratings downgrade
investmentnews.comBonds gained along with the dollar on Tuesday, while stocks fell as fresh concerns around China’s economic recovery and the state of US banks sent investors scurrying for havens.
Miners and carmakers led a drop in the Stoxx Europe 600 index after China’s trade plunged in July as slowing global demand clouded the outlook for exports, while domestic pressures weighed on imports. There were also further signs of trouble in China’s ailing real estate sector: Country Garden Holdings Co.’s stock and bonds plunged, with short-sellers swarming over China’s sixth-largest developer by sales, as scrutiny intensified over its operations and ability to meet debt payments.
Banks were among the leading decliners in Europe after a report by Moody’s Investors Service lowering credit ratings for 10 small and midsize US lenders, with the rating agency signaling it may downgrade major peers. Italy’s surprise tax on “extra profits” for lenders also weighed on the sector.
US equity futures dropped. The 10-year Treasury yield fell about eight basis points. European bonds also gained, with the 10-year German falling nine basis points. A gauge of the dollar climbed about 0.3%.
The renewed focus on the banking sector knocked optimism on Wall Street, already dented by the latest comments from a Federal Reserve official that pointed to more rate hikes to tame inflation. Fed Governor Michelle Bowman said Monday that additional hikes “will likely be needed” and that sent yields on the two-year to climb before paring some of its advance.
Investors, rattled by the collapse of a regional banks in California and New York this year, have been watching closely for signs of stress in the industry as rising interest rates force firms to pay more for
Read more on investmentnews.com
