(Updates with prices, fresh quotes)
By Natsuko Waki
LONDON May 19 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 as expectations
that the Federal Reserve is in no rush to tighten policy kept
the benchmark 10-year bond yield near last month's six-month low
Shanghai shares hit a three-week low as Beijing announced
regulations that tighten its grip on interbank lending and aim
to defuse risks among "shadow" non-bank financial firms that act
like banks. Fresh data also added to evidence of a cooling
"Markets think any weakness (in the Chinese economy) from
here will be met with a policy response from the authorities,"
said Manik Narain, strategist at UBS. "But there is room for
China to disappoint."
The benchmark MSCI world equity index fell
0.1 percent while European shares lost 0.6 percent.
Emerging stocks outperformed their developed
counterpart by rising 0.3 percent, approaching last week's 6-1/2
month high. Wall Street was heading for a weaker open with S&P
futures down 0.3 percent.
The dollar fell 0.1 percent against a basket of major
currencies while the euro ticked higher. The dollar fell
to a 3-1/2 month low of 101.07 yen.
NO STRAIGHT LINE
European equity markets were dragged lower by British pharma
group AstraZeneca, whose shares fell more than 13
percent after it rejected a sweetened "final" offer from Pfizer
Deutsche Bank 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, UBS 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
efforts to fortify capital by retaining earnings.
European shares have been rallying in recent weeks on
expectations that the European Central Bank would cut interest
rates to support the economy.
"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
The 10-year Irish government bond yield briefly
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.
Other peripheral yields in Italy and Spain rose as investors
looked to book profits before European elections later this
week. German Bund futures rose 7 ticks.
U.S. crude oil rose 0.6 percent to $102.67 a barrel.
(Additional reporting by Sujata Rao, John Geddie and Francesco
Canepa; Editing by Ruth Pitchford)