Financial Market Research and Analysis

Our analysts have their fingers on the pulse of the world's financial market news.

CFD trading is high risk and may not be suitable for everyone.
Focus on DB, Barclays, Monte Paschi
It is quite a shaky year-end for the European financials.

Deutsche Bank will pay $7.2 billion to DoJ

Deutsche Bank (+3.52%) agreed to pay $7.2 billion to the US Department of Justice (DoJ) to resolve a multi-year long lawsuit regarding its mortgage-backed-securities (MBS) dealings on the run up to the 2008 subprime crisis. The DB’s share price jumped 4.39% at the open.

The agreed $7.2 billion is roughly the half of the amount asked by the DoJ in September and does not cover for other complaints, including price fixings in the foreign exchange and metals markets, interbank rates manipulation and billions of dollars worth of funds driven out of Russia.

Although today’s settlement is not the end of the route, it has been a good short-term relief for investors, given that Deutsche Bank needn’t raise capital to cover for legal charges in the immediate future. We remind that Deutsche Bank’s share price had tanked shortly below €10 in September.

DB traded at €18.635 in Frankfurt today, its highest level since March.

Barclays rejected complaints

Barclays (-0.44%) rejected the DoJ complaints, saying that the bank has “an obligation to shareholders, customers, clients, and employees to defend [itself] against unreasonable allegations and demands”.

Monte Paschi saved by the government

Monte dei Paschi has been rescued by the Italian government after falling short at raising 5 billion euros from private investors. Paschi’s shares and other securities have been suspended. The bank could raise capital through ‘precautionary capital increase’.

On the other hand, the government's 20 billion-euro worth of rescue program for Italian banks has been approved by the EU.

Eurostoxx banks opened upbeat (+0.81%).

After having shortly peaked at 1.0499, the EURUSD bounced lower and consolidated between 1.0434/1.0452 in Asia. Traders remain seller on rallies, yet light option barriers stand from 1.0500 to 1.0700 at today’s expiry. Renewed positive momentum could temporarily send the pair into 1.0500/1.0550 mid-term resistance zone.

Pound depreciates before 3Q GDP and current account data

The pound extended losses against the greenback. The GBPUSD slid to 1.2271 in Asia. The divergence between the Bank of England (BoE) and the Federal Reserve (Fed) monetary outlook, combined to lingering Brexit concerns continue weighing on the pound.

The UK will release the third quarter growth and current account balance. The UK GDP is expected to have grown 0.5% quarter-on-quarter, while the current account deficit may have shrunk from 28.7 to 28.2 billion pound. A surprise softness in economic data could further weigh on the GBP-crosses. The key support is eyed at 1.2080, before 1.2000 handle. Cable is expected to finish the year in 1.2300/1.2250.

CFD trading is high risk and may not be suitable for everyone.