Markets In-Review: Markets Recover As Deutsche Woes Fade
■ Deutsche Bank (DB) surges 6.4% on Friday amid speculation U.S. DOJ may try to settle with it
■ DAX shows some weakness on DB woes, but recovers with bank towards weekend
■ Oil rises to USD 48.05 during week, visiting highest since August
■ S&P 500 manages to pull a 0.2% weekly gain on DB and oil backwind
Markets endured quite a bit of a struggle this week. Deutsche’s stock orchestrated developments, fueled by concerns that some of the bank’s clients may pull their business from it amid the U.S. Department of Justice demand for USD 14 bln, following the bank’s alleged illegal selling of mortgage backed securities. These have led Deutsche’s stock to a low of EUR 9.898 at the start of Friday’s session – less than half of where it was a year ago. The bank’s stock was off to an impressive recovery during the day, however, amid speculation that the U.S. DOJ may seek a settlement for a smaller fee with the German bank. French News AFP later confirmed that the bank is nearing a USD 4.5 bln settlement over the matter, leading it to add 6.4%, concluding at EUR 11.57.
Deutsche’s woes have certainly had a negative impact on the European continent as a whole, with the German DAX seeing a low of 10,189.94 points at the start of Friday’s session. Recovery at the German bank’s stock, however, has also helped the index to a 1% Friday gain, trimming weekly losses to -1.1%. Performance at the CAC 40 was similar to the DAX, with a 0.1% Friday increase, aiding trim weekly losses to -0.9%.
Sector-wise, French bank BNP’s stock gained 0.8% on Friday, aiding it trim weekly losses to 2.5%. Societe Generale lost no less than 3.5% for the week, as Friday’s rally failed to end the day in positive territory.
Deutsche’s turmoil also created some demand for the USD, with the currency proving a safer alternative to the Europe and its banking system. EUR/USD dipped to as low as 1.1153, around the start of the day’s session in equities. Aforementioned positive developments for Deutsche, however, then pulled it back to 1.1251, a tad higher than where it started the day. Instability also aided gold prices advance somewhat, adding about 0.6% during Friday’s session amid the brittle situation. The mood’s improvement, however, was fairly negative for the metal, losing 0.9% during the day and 1.6% for the week.
A long awaited OPEC deal
Oil proved as a second tiered volatility generator this week, with substantial gains at the black gold appearing as early as Wednesday, amid reports that OPEC has made a decision to cut production. Oil advanced 5.6% on Wednesday, ending the day at USD at USD 47.16 per bbl. Further gains into the week have led oil to USD 48.32, on Wednesday, a monthly high, later ending the week at an elevated USD 48.05. Oil’s gain is more impressive considering some headwind provided on Friday as Baker Hughes reported that the U.S. rig count climbed to 522, from 511 at the previous week, coming from a low of 404 in May.
Market behavior was somewhat better in the U.S., compared to the European counterparties, with a 0.2% weekly gain at the S&P 500, and a moderate 0.1% increase at the Nasdaq. The resilience of the S&P is even more impressive considering that at 2168.27 points, the index is 1% away from its all-time high.
Disclosure: None.