(Adds quote, updates prices)
* Deutsche Bank shares fall 5 pct on capital increase
* Geopolitics, Trump cool risk appetite
* Fed rate hike next week 90 pct discounted
* Graphic: World FX rates in 2017 tmsnrt.rs/2egbfVh
By Jamie McGeever
LONDON, March 6 European stocks and U.S. futures
fell on Monday, as political tensions, a Deutsche Bank cash call
and U.S. President Donald Trump's accusation that his
predecessor Barack Obama wiretapped him overshadowed a flurry of
M&A activity in Europe.
Deutsche Bank shares slumped more than 6 percent
after Germany's biggest lender said it needs to issue more stock
to raise 8 billion euros of capital.
That dragged down other European banks and overshadowed a
rise in shares of asset management firms after Aberdeen
and Standard Life set the terms of their 11 billion pound
tie-up. Both stocks rose more than 6 percent.
"Investors have refused to buy into Deutsche Bank’s
restructuring plans," said Ipek Ozkardeskaya, senior market
analyst at London Capital Group.
"Last year's restructuring has not achieved anticipated
results and has harmed investors' confidence in the bank's
ability to succeed."
Stefan de Schutter, a trader at Frankfurt-based Alpha, said
investors were questioning "whether this will be the last
capital hike or whether the bank will need more yet again in a
The FTSEuroFirst index of 300 leading shares and
Germany's DAX both fell 0.4 percent, hit by the
Deutsche Bank cash call. The European banking index was
down 0.65 percent.
U.S. stock futures pointed to a fall of around
0.25 percent at the open on Wall Street which would take some of
the shine off last week's rally to fresh record highs,
particularly the Dow's leap above 21,000 points.
Japan's Nikkei lost 0.5 percent, but was the outlier
in Asia. MSCI's broadest dollar-denominated index of
Asia-Pacific shares outside Japan rose 0.5
percent, recovering from Friday's 1 percent fall, its biggest
MSCI's benchmark global stock index was flat
on the day.
Risk appetite also took a hit on rising geopolitical
tensions in East Asia. North Korea fired four ballistic missiles
early in the day, while a spat between China and South Korea
over missile defence deepened.
Trump's accusation that his presidential predecessor Barack
Obama wiretapped him during the late stages of the 2016 election
campaign also cast a shadow over U.S. stocks.
FED HIKE A DONE DEAL
Investors opened the trading week almost certain that the
Federal Reserve will raise U.S. interest rates next week. Fed
Chair Janet Yellen on Friday all but confirmed market
expectations, barring any sharp deterioration in economic
U.S. money market futures are pricing in about
a 90 percent chance the Fed will raise interest rates by 0.25
percentage point at its meeting on March 14-15, with another
rate hike fully priced in by September.
But much of the market's move towards this level of
certainty was made early last week, meaning it was already
largely in the price of the dollar and U.S. bond yields.
Attention will now shift to the U.S. employment report for
February on Friday, while investors are also awaiting more
detail on Trump's fiscal plans.
"The rally (on Wall Street) has been mainly driven by
promises made by President Trump to lower taxes, increase
spending on infrastructure and the military," Rabobank analysts
wrote in a note on Monday.
"The importance of such pledges has increased as the Fed
intends to raise rates further. What could possibly go wrong?"
Both the dollar and Treasury yields slipped on Monday, as
investors took some profit from last week's moves and squared
positions ahead of the expected rate hike.
Having edged higher in early trades, the euro fell
0.33 percent on Monday after former French prime minister Alain
Juppe said he was not prepared to be a candidate in the
country's presidential election. Investors worried that made a
victory by far-right, anti-euro candidate Marine Le Pen more
China's yuan was little moved, fetching 6.8920 yuan per
dollar in offshore trade after China cut its growth
target for this year to 6.5 percent, compared to its 2016 goal
of 6.5-7 percent. Growth in 2016 was 6.7 percent.
The 10-year U.S. Treasury yield dipped to 2.472 percent
after hitting a two-week high of 2.521 percent on
Oil prices fell on concern over Russia's compliance with a
global deal to cut oil output and China's lower growth target.
International benchmark Brent futures fell 0.8 percent
to $55.45 per barrel.
Figures released last week showed Russia's February oil
output was unchanged from January, casting doubt on Russia's
moves to rein in output as part of a pact with oil producers
(Editing by Catherine Evans)