Sun, Oct 02, 2016 - Page 14 News List

European stocks recover on report of lower bank fine

Bloomberg

European stocks erased declines after Deutsche Bank AG swung to gains amid easing investor concern about its financial health.

The STOXX Europe 600 Index edged up 0.06 percent on Friday, reversing an earlier slide of 1.7 percent. It was down 0.7 percent from a week earlier.

Deutsche Bank erased a drop of as much 9 percent to rise 5.8 percent after a report it is nearing a US$5.4 billion settlement with the US Department of Justice, lower than feared. The lender, which tumbled on Monday amid concerns about its capital buffers, fell anew earlier on Friday after a report that hedge funds moved to cut their exposure to it.

“There may be speculation about the fine,” said Michael Woischneck, who manages about US$180 million as senior equities manager at Lampe Asset Management in Dusseldorf, Germany. “It’s the last trading day of the third quarter and for a lot of mutual funds it’s even the end of their fiscal year — Deutsche Bank is in a lot of those, and they don’t want the stock trading in single digits, so they may be buying. All of the problems that were there this morning are still there and will still be there next week.”

Lenders in the STOXX 600 erased a plunge of as much as 3.8 percent after the Agence France-Presse report on Deutsche Bank that cited an unnamed person familiar with the matter.

Italian and Spanish lenders, including Banco Popolare SC and Bankia SA, reversed earlier declines to rise at least 2.9 percent. Commerzbank AG fell 1.5 percent toward an almost eight-week low.

It has been a rough week for European lenders, with worries about Deutsche Bank followed by job cuts at Commerzbank, a US$1.1 billion lawsuit settlement for Royal Bank of Scotland Group PLC and prospects of cost reductions at Credit Suisse Group AG.

The Swiss lender has fallen 3.7 percent this week, while Commerzbank is down 9 percent, heading for its worst performance among peers. A gauge of euro-area swings has advanced 17 percent in the period, the most in more than a month.

A rebound in the STOXX 600 banks gauge from a four-year low in July ran out of steam last month, dragging it to the first monthly drop since June. That soured its biggest quarterly advance since March last year. The broader equity benchmark has risen 4 percent in the past three months, its first quarterly gain this year.

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