Deutsche Bank helps lift European stocks before Yellen, Draghi’s speech

Reuters London | Updated on January 16, 2018 Published on September 28, 2016


A rise in Deutsche Bank shares helped push European stocks higher on Wednesday, easing concerns over Germany’s financial sector that had hit equities in Asia and drove investors into safe-haven government bonds and the dollar.

Beyond banking sector worries, investors were looking ahead to US Federal Reserve Chair Janet Yellen’s appearance before a Congressional committee, a speech by European Central Bank President Mario Draghi and a meeting of oil producers in Algiers.

Deutsche, Germany’s biggest lender, faces big fines over claims it mis-sold mortgage-backed securities and, like other euro zone lenders, has been squeezed by the European Central Bank’s low interest rates. Its shares, which hit record lows on Tuesday have fallen some 50 per cent this year.

However, the stock rose more than 3 per cent in early deals, helping push the pan-European STOXX 600 index up 1.2 per cent, led by banks.

Analysts said sentiment towards riskier assets was also improved by data on Tuesday showing US consumer confidence this month hit its highest since 2007.

German two-year government bonds, however, held near Tuesday’s record low of minus 0.711 per cent. Before an auction of the bonds due later on Wednesday, they yielded minus 0.702 per cent, flat on the day.

Asian shares spent much of the trading session in negative territory, on investor concern about the state of the European banking sector and lower oil prices.

MSCI’s broadest index of Asia-Pacific shares outside Japan moved in and out of negative territory and last stood less than 0.1 per cent higher on the day.

Japanese shares fell, with the Nikkei 225 index falling 1.3 per cent by the close.

Oil prices were slightly higher, partially reversing Tuesday’s fall of some 3 per cent on diminished expectations that oil producers meeting in Algiers this week would reach an agreement to ease a global glut of crude.

Members of the Organization of the Petroleum Exporting Countries (OPEC) are due to meet at 1400 GMT.

Some in the market say the Algiers talks could lay the groundwork for an agreement at OPEC’s formal policy meeting in Vienna on November 30, said Vyanne Lai, oil analyst at National Australia Bank in Melbourne.

“I think OPEC producers realise they can't continue to expand production indefinitely - OPEC producers are close to maximum capacity - so there could be room for a deal (in November),” Lai said.

Brent crude, the international benchmark, last traded at $46.08 a barrel, up 11 cents on the day on data showing a surprise drawdown in US inventories.

Yellen speaks

The dollar was up 0.3 per cent against a basket of currencies. Fed chief Yellen testifies before the House Financial Services Committee on regulation but may face questions on the interest rate outlook and the economy.

The Fed left rates on hold last week but strongly signalled they could rise in December.

ECB head Draghi speaks in Berlin.

The euro fell 0.2 percent to $1.1188.

“While we admit that near-term downside risks to the euro have increased due to financial stability concerns we think that any setback into the $1.11 handle offers a buying opportunity," Hans Redeker, head of currency strategy at Morgan Stanley said.

The yen weakened 0.3 per cent to 100.70 per dollar and sterling dipped 0.2 per cent to just below $1.30.

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Published on September 28, 2016
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