European shares set for their biggest drop since early July Turkish assets slide after downgrade; Philippine peso slumps Share on Facebook Share on Twitter European stocks headed for their biggest drop since July as banks dragged equities lower and a cluster of political events prompted investors to retreat to the safety of government bonds and the yen. A global measure of shares declined for a second day as Deutsche Bank AG sank to a record on speculation Germany’s biggest bank will need to raise capital. Emerging markets tumbled, with Turkey’s lira sliding after Moody’s Investors Service cut the nation to junk and the Philippine peso reaching a seven-year low on international mistrust of President Rodrigo Duterte. Oil prices recouped some of Friday’s losses as investors weighed whether producers will agree on action to support prices when they meet Wednesday. “The drama around Deutsche Bank puts the European financial sector in the spotlight once again,� said Michael Woischneck, who manages about $180 million as senior equities manager at Lampe Asset Management in Dusseldorf, Germany. “We’re also entering a quarter with a lot of political event risks and I’d expect big swings in volatility.� Stocks The MSCI All-Country World Index fell 0.4 percent as of 8:51 a.m. New York time, declining for a second day. The Stoxx Europe 600 Index dropped 1.4 percent, heading for its biggest slide since early July, while S&P 500 Index futures expiring in December lost 0.4 percent. Deutsche Bank fell 5.9 percent after a report that German Chancellor Angela Merkel has ruled out any state assistance before the national election next year. Concern that the lender’s capital buffers will be undermined by mounting legal charges has weighed on the shares, which have tumbled more than 50 percent this year. The bank’s 1.75 billion euros ($2 billion) of 6 percent additional Tier 1 bonds, the first notes to take losses in a crisis, fell about 2 cents on the euro to 73 cents, near a seven-month low, according to data compiled by Bloomberg. All energy producers in the Stoxx 600 Oil & Gas Index retreated, with Total SA and Royal Dutch Shell Plc down more than 1.4 percent before this week’s OPEC meeting. Among the 40 Stoxx 600 shares that rose, Lanxess AG surged more than 8.1 percent after the German chemical maker agreed to buy U.S. rival Chemtura Corp. for about $2.1 billion in cash. Chemtura soared 16 percent in early New York trading. The CBOE Volatility Index of U.S. stock swings jumped 13 percent, while the VStoxx Index for euro-area shares rallied 18 percent. The European gauge closed at its lowest since 2014 on Friday, a level that showed complacency among investors, according to Simon Wiersma, an investment manager at ING Bank NV. The MSCI Emerging Markets Index declined 1.1 percent. All 11 industry groups dropped, paced by industrial and consumer-discretionary companies. Taiwan Semiconductor Manufacturing Co., which makes chips for Apple Inc., led shares of suppliers lower on concern of slower iPhone 7 sales. Commodities Crude oil was 1.2 percent higher at $45.02 a barrel in New York after a 4 percent slide on Friday. Algeria’s Energy Minister said Saudi Arabia, the world’s No. 1 oil exporter, has offered to cut production to January levels to help convince other major producers to agree output curbs this week in Algiers. Nickel declined 1.6 percent in London, pulling back from a one-month high. Investors are awaiting the result of an environmental audit in the Philippines, which may close mines in the world’s largest supplier. Copper retreated 0.5 percent from a seven-week high. Gold was little changed, after climbing 2.1 percent last week. The precious metal’s price swings may become more severe in the final quarter owing to the U.S. presidential election and an expected interest-rate increase by the Fed, according to Citigroup Inc. “Politics could start to usurp central banks as the predominant influence on asset prices and it all starts with the first U.S. presidential debate tonight,� Steven Barrow, head of currency strategy at Standard Bank Group Ltd. in London, said in a note to clients. Currencies The Philippine peso led losses among emerging-market currencies, falling 0.6 percent and stocks dropped as investors were unnerved by Duterte’s policies on combating drug trafficking and efforts to boost economic and defense ties with China and Russia. Turkey’s lira and the nation’s stocks and bonds tumbled after Moody’s cut the nation’s credit rating. Currencies of commodity-exporting nations fell with oil, led by the Malaysian ringgit. The yen strengthened 0.6 percent to 100.46 per dollar as investors sought havens. Former Japanese top currency official Eisuke Sakakibara forecast on Monday that Japan’s currency will slowly strengthen, saying in a Bloomberg TV interview that he wouldn’t be surprised if it reaches 90 by the end of next year. Sakakibara, dubbed “Mr. Yen� for his ability to influence the exchange rate while a senior Ministry of Finance bureaucrat in the 1990s, correctly predicted the currency’s advance this year from near 120 to beyond 100. The Bloomberg Dollar Spot Index fell 0.2 percent following a 0.6 percent loss last week. Bonds Benchmark sovereign bonds rallied across most of Asia and Europe, with 10-year yields falling to minus 0.1 percent in Germany and minus 0.07 percent in Japan. The Bank of Japan last week shifted the focus of its monetary policy to managing yields and Governor Haruhiko Kuroda said Monday the shape of the yield curve will remain broadly where it is. Treasuries advanced, with the yield on 10-year notes dropping two basis point to 1.60 percent. The U.S. is selling $26 billion of two-year securities on Monday, before sales of a combined $62 billion of five- and seven-year bonds later this week. The Bank of England will begin a 10-billion pound ($13 billion) corporate-bond buying program on Tuesday. The yield on sterling corporate debt was about 2.23 percent, near the record low of 2.06 percent set last month, based on Bloomberg Barclays index data.

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