Europe close: Bounce in Deutsche Bank lifts shares
By Alexander Bueso
Date: Friday 30 Sep 2016
(ShareCast News) - Unconfirmed reports that Deutsche Bank might reach a settlement with the US Department of Justice at the weekend pulled European stocks off their lows of the session.
The benchmark Stoxx Europe 600 edged higher by 0.06%, France's CAC 40 was 0.10% stronger and Germany's DAX tacked on 1.01%.
Meanwhile, the Stoxx 600's banks index finished 0.66% higher, to 140.23, after plumbing an intra-day low of 133.99, paring earlier losses on the back of the above reports.
Shares in the German lender closed at €11.66, having earlier hit an intra-session low of €9.90.
To take note of, reports earlier in the day said chief executive John Cryan had sent a letter to staff saying that recent media speculation that a group of hedge funds were reducing their exposure to the lender was "causing unjustified concerns" and that the bank has "strong fundamentals".
This followed press reports on Thursday that a number of key funds had withdrawn money from the German lender, which currently faces a $14bn fine from the US Department of Justice for mis-selling mortgage-backed securities.
Goldman Sachs said it believes Deutsche's liquidity position for the second half of 2016 is stable and further strengthened by funding backstops from the European Central Bank, which remain available to all Eurozone banks.
"This said, the reaction of (admittedly less liquid) the ADR to a single piece of news flow [on Thursday evening] demonstrates the extent of concern in the market. As we highlighted previously, as market concerns intensify, achieving resolution to litigation, and thus capital concerns, is important."
Meanwhile in the UK, Royal Bank of Scotland was under the cosh as it announced a restructuring of its operations to ring-fence retail operations from riskier parts of the business.
Away from banks, Telefonica was in the red after it cancelled the planned listing of its Telxius business on the back of weak investor demand.
Insurers AXA and Allianz were in focus following a report that they had advanced to the next stage of talks over a deal with Standard Chartered that would allow them to sell their products through the bank's Asian branches.
On the macroeconomic front, a 'flash' estimate from Eurostat showed inflation in the Eurozone doubled as expected in September to 0.4%, as the impact of weaker energy prices began to fade.
Core inflation, which excludes unprocessed food and energy, was stable at 0.8% versus expectations of a nudge higher to 0.9%.
Excluding energy, food, alcohol and tobacco products, the inflation rate was 0.8%, the same as in August.
Prices of food, alcohol and tobacco products were up 0.7% compared to 1.3% the month before, while services sector prices were up 1.2% compared to 1.1%. Meanwhile, energy prices declined 3% on the year compared with a 5.6% drop in August.
The Eurozone unemployment rate was steady compared to the previous month at 10.1% in August.
This was a touch weaker than expectations for it to nudge down to 10%, but remained at the lowest rate recorded in the bloc since July 2011.
On the year, it was down from 10.7% in August 2015.
Oil prices retreated on Friday amid doubts about the OPEC deal agreed on Wednesday and as investors booked some profits. West Texas Intermediate was down 1.1% at $47.31 a barrel and Brent crude was off 1.5% at $48.51.
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