Published: Sat, September 17, 2016
Economy | By Melissa Porter

US, European shares slide, led by plunge in Deutsche Bank

The U.S. -listed shares of Deutsche Bank, the German financial conglomerate, plunged $1.30, or 9%, to $13.46 after the bank said it did not intend to pay the $14 billion settlement that the Department of Justice had proposed.

The bonds' trading levels were already reflecting market concerns around coupon deferral, but these fears could now escalate.

EUROPE DRAGS: The news out of Deutsche Bank dragged European stocks lower, with Germany's DAX closing down 1.5 percent, France's CAC-40 index down 0.9 percent and the U.K.'s FTSE 100 index down 0.3 percent.

In late morning, the Dow Jones industrial average was down 85.5 points, about 0.5 percent, at almost 18,127. But the DOJ's reported demand for a $14 billion settlement-which is among the highest amounts that the department ever sought in a settlement related to the financial meltdown-was not welcomed by the bank. The DOJ made no public comment on these negotiations.

Deutsche Bank shares, which have lost around half their value this year, tumbled 7.6 percent to 12.10 euros in Frankfurt on Friday, with analysts saying the bank may need to raise fresh funds from investors or sell assets to shore up its capital ratios.

While the inflation data pushed the dollar to a more than two-week high against a basket of major currencies, uncertainty ahead of a Bank of Japan policy meeting on Wednesday limited the dollar's gains against the yen.

Deutsche's new CEO John Cryan has led a cost-cutting and restructuring drive that's involved job cuts and the bank's withdrawal from some smaller countries. "While those views have been largely scaled back, central bank decisions will still be at the front and center next week", Bernard Aw of IG said in a commentary. The Standard & Poor's 500 index fell 8.10 points, or 0.4 percent, to 2,139.16 and the Nasdaq composite fell 5.12 points, or 0.1 percent, to 5,244.57. South Korean, Chinese, Taiwanese and Hong Kong markets are closed for holidays.

German Finance Ministry spokeswoman Friederike von Tiesenhausen weighed into the debate, saying Germany is "aware that USA authorities have agreed with other banks on settlement payments, and so the German government assumes that a fair result will be reached at the end of this process as well, on the basis of equal treatment". The Monetary Policy Committee noted a "less negative" near-term outlook for the housing market and better than anticipated consumption data.

OIL PRICES: Benchmark U.S. crude lost 77 cents to $43.14 per barrel in electronic trading on the New York Mercantile Exchange. Both Brent crude and US crude retreated 0.6 percent to $46.32 and $43.64 a barrel, respectively. It gained 74 cents in London.

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