This week witnessed the effects of massive losses of Deutsche Bank’s and Commerzbank’s shares and OPEC deal about first oil output cut in eight years. Deutsche Bank’s share price fell below the €10 mark for the first time in around 30 years. After U.S. wanted Deutsche Bank to pay $14 billion over toxic mortgages, Deutsche Bank faced financial crisis again and refused to pay US penalty. This demand from US hits the markets so hard. We shouldn’t forget that Bank of America had agreed to pay a record $16.7bn in 2014 to US authorities for selling bad mortgage loans that helped start the 2008 financial crisis. On the other side, Deutsche Bank’s CEO has repeatedly said that there is no need for government support because the bank has strong fundamentals.
In addition to Deutsche Bank, Germany’s second-biggest bank, Commerzbank, announced plans to cut 10000 jobs and after that, it has seen its shares fall %4…
When I look at the global capital index via Bloomberg, Deutsche Bank’s leverage ratio lags than its peers and this means that the bank is more indebted than the industry average…
The German DAX moved lower and global contagion effect pushed the Europe into negative territory. Almost all stocks have been affected negatively by European Bank’s loan flows problem. In the end, the Dow Jones Industrial Average, the S&P 500 Index, the Nasdaq Composite,the Japan Nikkei 225, the FTSE 100 and the Dow 30 index lost their values by hitting Deutsche Bank’s contagion fear and record lower share prices this week. They rebounded little as OPEC cuts crude output but after that they are getting lower again. Fear versus positivity..
The chart above, of credit default swap prices, shows the contagion effect in play…
Graph Source: http://investorplace.com/2016/09/stock-market-today-nyse-dow-jones-industrial-average-investing-news-fed-deutsche-bank/#.V-6cQiiLRhG
Crude oil went up from 44.77 (27/092016) to 48.12 on friday after OPEC deal to cut production. The winners will be the oil production countries with deficits, of course. I guess that we will see the 50-60$ oil at the end of the 2016 and I expect the 60-70$ oil or maybe more agressive price in 2017. Moreover, It seems that oil prices will change the global balance in future. This time, Iran is on the stage and Russia-Saudi cooperation will change the way look at the oil prices. On the other hand, this week, US crude inventories decrease again and this helps to increase the oil prices,too.
Reminder: World Crude Oil Production by Selected Countries via EIA report
You can reach the report here: http://www.eia.gov/totalenergy/data/monthly/pdf/mer.pdf
US CRUDE INVENTORIES
Increasing concerns about coming referendum on constitutional reforms caused the CDS (Credit Default Swap) spreads rise in Italy and this means that the risk is increasing about italian banks’ creditworthiness. Investors are worrying about European Banks future in these days.
Will Deutsche Bank collapse and take down the European banking system with it?