(MENAFN- AFP) World stock markets slumped Monday as a crash in Deutsche Bank's shares offset a surge in German business confidence and the two US presidential candidates headed into their debut debate.
Traders took profits after last week's rallies sparked by the US central bank's decision to freeze interest rates a while longer before ending the week in the red.
"It's been a rough start to the week," said ADS Securities London analyst Paul Webb.
He noted however that "significantly better-than-expected business sentiment data out of Germany" had lifted the euro.
London's benchmark FTSE 100 index closed 1.3 percent lower compared with the close on Friday.
In the eurozone, Frankfurt's DAX 30 plunged 2.2 percent and the Paris CAC 40 lost 1.8 percent.
Shares on Wall Street fell more moderately, as Hillary Clinton and Donald Trump geared up to face off in the first presidential debate for November's election.
"Don't expect risk markets to move decisively until dust settles on the US presidential arena," John Blank, of Zacks Investment Research, said in a note to clients.
The euro jumped to $1.1272.
A strong yen meanwhile knocked the stuffing out of Tokyo's main Nikkei stocks index, which ended down 1.25 percent. Hong Kong's Hang Seng index retreated 1.6 percent.
- Historic low for Deutsche Bank -
In Europe, German business confidence soared to its highest level in more than two years in September, the Ifo economic institute said, recovering from a post-Brexit slump and signalling a rosier outlook for Europe's largest economy.
The closely-watched index unexpectedly jumped to 109.5 points from 106.3 points in August to reach its highest reading since May 2014, the Munich-based Ifo said.
"The German economy is expecting a golden autumn," Ifo president Clemens Fuest said in a statement.
Jennifer McKeown, of Capital Economics, said the reading was "at odds" with recent data from an economic survey known as the PMI, indicating a sharp slowdown in GDP growth.
"We think that the true picture of German activity lies somewhere between those painted by the PMI and the Ifo surveys and see growth slowing slightly in the months ahead," she said in a note to investors.
Shares in Deutsche Bank, Germany's biggest lender, plunged 7.5 percent to a historic low of 10.55 euros.
"Weekend reports that German Chancellor Angela Merkel had ruled out the prospect of any form of state aid in the event that Deutsche Bank's problems become more acute have hit the share price hard," said Michael Hewson, chief market analyst at CMC Markets UK.
US authorities are targeting Deutsche Bank for a record $14-billion fine (12.5 billion euros) over its actions leading up to the subprime mortgage crisis in 2008.
"While the eventual fine may not be anywhere near that much, the litany of legal problems has raised concerns about the health of one of Europe's largest lenders and any contagion effect to the rest of Europe's sickly banking sector," Hewson added in a client note.
Oil prices rose modestly ahead of a Wednesday meeting of producers of the Organization of the Petroleum Exporting Countries cartel in Algeria that could agree to cap supplies.
Analysts have warned however that optimism should be tempered by a stubborn supply glut and disagreement among OPEC members.
- Key figures around 1545 GMT -
London - FTSE 100: DOWN 1.3 percent at 6,818.04 points (close)
Frankfurt - DAX 30: DOWN 2.2 percent at 10,393.71 points (close)
Paris - CAC 40: DOWN 1.8 percent at 4,407.85 points (close)
EURO STOXX 50: DOWN 1.9 percent at 2,976.33
New York - DOW: DOWN 0.8 percent at 18,118.22
Tokyo - Nikkei 225: DOWN 1.3 percent at 16,544.56 (close)
Hong Kong - Hang Seng: DOWN 1.6 percent at 23,317.92 (close)
Shanghai - Composite: DOWN 1.8 percent at 2,980.43 (close)
Euro/dollar: UP at $1.1272 from $1.1228 late Friday
Dollar/yen: DOWN at 100.32 yen from 101.02 yen
Pound/dollar: UP at $1.2983 from $1.2972
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