DAX 30 Fundamental Forecast – September 19, 2016

The DAX 30 tumbled over 111 points to trade at 10319.50 as traders moved away from equities and commodities ahead of next week’s major bank meetings.

The U.S. Justice Department proposed that Deutsche Bank AG pay $14 billion to settle a set of high-profile mortgage-securities probes stemming from the financial crisis, according to people familiar with the matter, a number that would rank among the largest of what other banks have paid to resolve similar claims and is well above what investors have been expecting. The leading German bank was trading down around 8%, while Deutsche Bank’s €1.75 billion of 6% additional Tier 1 bonds, the first notes to take losses in a crisis, fell 4 cents to 79 cents. The bank’s 650 million pounds of 7.125% notes dropped 5 pence to 81 pence on the pound on concerns the bank may be forced to shore up billions more in liquidity.

“The Deutsche Bank news kind of rattled markets,” said Jasper Lawler, an analyst at CMC Markets in London. “It just goes to show that we’re still dealing with the same old headwinds: this low-interest rate environment, which will go on for a while, and the regulatory scrutiny.”

“None of the European banks has settled with the DOJ on RMBS yet so Deutsche Bank is the first to enter negotiations with Barclays, UBS, Credit Suisse and RBS also facing this issue,” RBC analyst Fiona Warfield said in note. “We would expect Deutsche Bank’s final settlement to be significantly below the starting negotiation amount as seen at other banks although it remains uncertain where the final settlement will end up and the final impact on the capital ratios. Resolving this issue remains key for Deutsche Bank as it will give more clarity on capital, although there are a number of other moving parts – namely the Russian equities investigation and also the IPO of Postbank.”

The markets’ attention was so focused on DB in particular, and European banks in general (Italy’s perpetually insolvent Monte Paschi was halted after falling as much as 7.8%, after a report the bank’s recapitalization could be done through a private placement to institutional investors and a voluntary subordinated bonds conversion with minimum threshold, along the lines of Greek banks’ recapitalizations,

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 September 19, 2016

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Government Bond Auctions

Date Time Country Auction

Sep 19 11:00 Belgium Holds OLO auction

Sep 20 11:30 UK Jul 2047 Gilt

Sep 21 10:30 Denmark Holds bond auction

Sep 21 11:03 Sweden Holds bond auction

Sep 21 11:30 Germany Eur 4bn 0% Oct 2021 Bobl

Sep 22 17:20 Italy Announces details of bond auction