By Anora Mahmudova and Barbara Kollmeyer, MarketWatch
U.S.-listed Deutsche Bank shares jump 13%
U.S. stocks rallied on Friday, boosted by a double-digit rally
in Deutsche Bank AG shares, which were recovering from brutal
losses in Thursday's session amid heightened concerns about the
health of the German lender's balance sheet.
U. S-listed shares of Deutsche Bank soared 13% on the day as
reports continued to circulate that the bank may be able to
negotiate a less-onerous settlement with the U.S. Justice
Department than the $14-billion figure being discussed according to
a report from The Wall Street Journal two weeks ago.
U.S. equities also garnered support from modest gains in oil
prices after a turbulent week during that resulted in a tentative
agreement to limit crude production by some of the world's biggest
producer.
The S&P 500 index rallied 17 points, or 0.8%, to 2,168, with
nearly all the main sectors trading higher. Financials and energy
sector led the gainers, while utilities lagged behind.
"It is not surprising to see markets react to Deutsche Bank's
news, as it is one of the major global banks. Just as fears about
its potential failure resulted in a decent selloff yesterday,
today's news of a potential settlement is driving markets higher,"
said Mark Kepner, managing director of sales and trading at Themis
Trading.
The Dow Jones Industrial Average gained 170 points, or 0.9%, to
18,311, while the Nasdaq Composite Index climbed 40 points, or
0.8%, to 5,309.
"Central banks have spent eight years convincing markets that
they would not let another Lehman-type failure. But belief in such
a central bank put, or the buffer that there will be liquidity in a
time of crisis, is dissipating, which is why we are seeing such
volatility because of what's happening to Deutsche Bank," said
Steve Chiavarone, associate portfolio manager at Federated Global
Allocation Fund.
Read: Why a Deutsche Bank bust wouldn't be as bad as Lehman's
(http://www.marketwatch.com/story/why-a-deutsche-bank-bust-wouldnt-be-as-bad-as-lehmans-2016-09-30)
On Thursday, the Dow industrials closed nearly 200 points lower
on Thursday
(http://www.marketwatch.com/story/wall-street-stocks-could-struggle-as-euphoria-over-opec-deal-fades-2016-09-29)
after a report that some of the lender's biggest clients were
pulling cash and securities or dialing back trading activity
through the bank
(http://www.marketwatch.com/story/fearful-clients-pull-billions-of-dollars-out-of-deutsche-bank-2016-09-30).
Wall Street's CBOE Volatility index , or "fear gauge," jumped the
most in three weeks
(http://www.marketwatch.com/story/wall-streets-fear-gauge-jumps-the-most-in-3-weeks-on-deutsche-bank-worry-2016-09-29)
at one point in that session.
Concerns about Deutsche Bank intensified this week after reports
surfaced that a request for aide from German Chancellor Angela
Merkel in negotiating with the Justice Department was rejected.
Deutsche Bank CEO John Cryan has denied that the firm requested
state help or is in need of it.
Still, investors have been worried that problems at one of
Europe's largest banks could ripple through global markets similar
to Sept. 15, 2008, when Lehman Brothers was forced into the
bankruptcy, roiling markets world-wide.
Read:Deutsche Bank crisis threatens to roil global markets
(http://www.marketwatch.com/story/a-crisis-in-european-banks-threatens-to-roil-global-markets-2016-09-28)
"It is surprising to hear the [German Chancellor] Merkel saying
they will not help Deutsche Bank, but it's also possible she is
saying this to get the U.S. government to rethink the size of the
fine. Everybody knows the cost of allowing a major bank collapse,"
said Chiavarone.
Friday marks the end of the week, month and quarter, and the
S&P 500 is up 0.1%, down 0.2%, and up 3.2%, respectively, with
one session left to go.
Deutsche Bank worries: Frankfurt-listed shares of Deutsche Bank
(DBK.XE) briefly fell to their lowest level on record Friday,
triggering sharp losses across European stock indexes. But the
German bank's U.S.-listed shares (DBK.XE) rebounded seemingly after
a J.P. Morgan Chase & Co. report that estimated the fine by
Justice Department will be about $5.4 billion, much lower than
earlier reports. U.S.-listed shares shot up more than 12% Friday,
after closing 6.7% lower in the prior session. Meanwhile, shares
traded in Europe pared losses, and were down slightly.
Shares of Deutsche Bank have continued to extend its gains to
what is shaping up to be one of the its best gains in 5 years.
The Stoxx Europe 600 index
(http://www.marketwatch.com/story/deutsche-bank-shares-hit-a-record-low-weighing-heavily-on-european-markets-2016-09-30)
pared losses and was flat, as banks across the region
rebounded.
Economic docket: Consumers spending was barely changed in August
(http://www.marketwatch.com/story/consumer-spending-softens-in-august-2016-09-30),
while personal income inched and savings rate inched higher.
Inflation also inched up, but remains below the 2% target set by
the Federal Reserve.
Stocks to watch:Costco Wholesale Corp
(http://www.marketwatch.com/story/costco-ernings-get-boost-from-switch-to-visa-2016-09-30).(COST)
reported a surprise jump in earnings, helped by lower credit card
fees after its new deal to accept Visa (V) cards.
Shares of Cognizant Technology Solutions Corp
(http://www.marketwatch.com/story/cognizant-technologys-stock-tumbles-after-disclosure-of-internal-foreign-payments-probe-2016-09-30).(CTSH)
tumbled after the consulting company disclosed an internal
investigation it whether certain payments it made to facilities in
India violated the U.S. Foreign Corrupt Practices Act.
Other markets: Oil prices were stable Friday, with U.S. crude
rose 0.5% at $48.08 a barrel. The U.S. dollar and gold prices were
unchanged.
Asian markets
(http://www.marketwatch.com/story/asian-shares-rattled-by-concerns-over-oil-deutsche-bank-2016-09-30)
finished largely lower, with the Nikkei 225 index dropping
1.4%.
(END) Dow Jones Newswires
September 30, 2016 12:14 ET (16:14 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.