(Repeats story first published Friday with no changes to text)
By Rodrigo Campos
NEW YORK, Sept 30 Deutsche Bank will likely cast
a pall over equity markets next week as the largest German
lender navigates a possible multi-billion dollar settlement with
the U.S. Department of Justice over the sale of mortgage-backed
Deutsche shares traded in the United States hit a
record low on Thursday, falling as much as 24 percent since the
DOJ asked the bank to pay $14 billion to settle charges related
to its sale of toxic mortgage bonds before the financial crisis.
But the stock had its best day in five years Friday, on
record volume, after news agency AFP reported that Deutsche was
nearing a much-lower $5.4 billion settlement with the DOJ.
Analysts at Morgan Stanley estimated Deutsche could pay
about $6 billion to settle with the DOJ.
Stocks on Wall Street broadly tracked Deutsche over the past
few days and will likely continue to do so, analysts say.
"While it is in the headlines, it is an overhang," said Art
Hogan, chief market strategist at Wunderlich Securities in New
"Once they come to some resolution on the difference between
what they are charged, $14 billion, and what they are going to
pay, call it $5 or $6 billion, the market is going to be afraid
there is a problem," Hogan said.
Deutsche's market capitalization of near $18 billion makes
it much smaller than its U.S. peers like Bank of America
, at $155 billion, or Citi, at $133 billion.
However its trading relationships with the world's largest
financial institutions make a potential breakdown at Deutsche a
bigger risk to the wider financial system than any other global
bank, the International Monetary Fund said in June.
"Its world print and eurocentric role are unrivaled, so it
is going to drive the narrative next week," said Peter Kenny,
senior market strategist at Global Markets Advisory Group in New
"My sense is we're not really going to have the kind of
clarity that investors like to have ... for probably weeks."
AFP reported, citing a person familiar with the matter, the
settlement could be announced in the next couple of days.
Analysts stopped short of comparing the present turmoil at
Deutsche to the bankruptcy of U.S. investment bank Lehman
Brothers in 2008, part of a financial crisis that triggered the
deepest recession in decades for the U.S. economy.
"Deutsche Bank is not Lehman and does not threaten a
2008-like 'sudden stop' to the global economy," said Mohamed
El-Erian, chief economic adviser at Allianz.
The concern, he said, lies in this being "a reminder of the
fragility of some European banks" and an additional headwind to
The S&P 500 rose for the week but the index's banks
, suffered big losses, as a group, on Monday and
Thursday because of the turmoil surrounding Deutsche Bank.
Separately, the grilling of Wells Fargo's chief executive in
Congress over fraudulent business practices also weighed on bank
Frankfurt's stock exchange will be closed on Monday for the
Day of German Unity.
Equity investors will also focus next week on the 10
speeches by top U.S. Federal Reserve officials, with the
highlight from Vice Chair Stanley Fischer on Friday, and clues
to monetary policy. Key economic data, including September's
employment report on Friday, will keep traders on tenterhooks.
"We got our own troubles here with the economy slowing down,
next week we'll know if (week data) was a blip or a trend," said
Phil Orlando, chief equity strategist at Federated Investors in
He added: "The market has to have a healthy respect for the
downside in the event the DOJ and Deutsche don't find a
(Reporting by Rodrigo Campos; additional reporting by Jennifer
Ablan and Chuck Mikolajczak; Editing by Daniel Bases and Cynthia