OPEC and Deutsche Bank Keep Markets on Edge

TradeTheNews.com Weekly Market Update: OPEC and Deutsche Bank Keep Markets on Edge
Fri, 30 Sep 2016 16:07 PM EST

The trading week opened with two main storylines dominating markets. All eyes were on Berlin and Algiers as the precipitously declining stock price of Germany's largest bank and growing expectations OPEC members would finally reach some sort of coordinated production agreement pushed and pulled on investors' willingness to take risk. Stocks were under pressure on reports that the German government had ruled out any state assistance for Deutsche Bank which was facing a reported $14B demand from the DOJ to settle and MBS probe. Meanwhile crude prices slipped back as it appeared OPEC still didn't have a consensus on a production freeze headed into this week's meeting. Global Treasury markets rallied as safe haven flows buoyed prices and weighed on yields.

By midweek stocks and oil prices began to stabilize as the headlines surrounding DB and OPEC improved. Shorts were caught off guard when OPEC managed to cobble together enough unity to announce a deal had been reached to cut output to 32.5-33M bpd beginning in November (from 33.2M bpd in Aug). Though much of the details still have to be ironed out, by Friday WTI crude prices reached $48 for the first time since mid-August up some 8% on the week, sparking a similar rally in the energy stocks.

DB shares on the other hand went on a wild ride after reports surfaced hedge funds had begun cutting exposure by reducing collateral with the bank's prime brokerage unit. The headline sparked panic amongst some stock holders who harkened back to the collapse of Lehman Brothers at the start of the 2008 financial crisis. By Friday morning the shares were trading below €10 on the European open. Buyers stepped in aggressively as rumors of a $5.4B settlement circulated, and shares continued to surge as European press sources seemed to affirm that figure. European markets responded in kind finishing Friday's session up 1% after being down 2%.

US equity markets finished the week on a solid note largely on the coattails of the rebound in DB shares. The safe haven flows into Treasuries from earlier in the week unwound and combined with stepped up reports of brewing technology M&A and continued signs of a receptive IPO market resulted in a 1% gain in the major indices on Friday. Dow Theorists have been quick to point out with another 2% rise in the Transports, that index is nearing September highs. For the week the DJIA gained 0.3%, the S&P500 added 0.2%, and the Nasdaq rose 0.1%.

MONDAY 9/26
(JP) BoJ Gov Kuroda: Main tool for more easing to be more cuts in negative rates
*(DE) GERMANY SEPT IFO BUSINESS CLIMATE: 109.5 (2-year high) V 106.3E; CURRENT ASSESSMENT: 114.7 V 112.9E
*(UK) AUG BBA LOANS FOR HOUSE PURCHASE: 37.0K V 37.1KE
(EU) ECB's Draghi: euro area recovery expected to continue at moderate and steady pace, but slightly less momentum than thought in June - comments to European Parliament
TWTR: Disney reportedly working with adviser to consider a bid for Twitter - press

TUESDAY 9/27
*(EU) EURO ZONE AUG M3 MONEY SUPPLY Y/Y: 5.1% V 4.9%E
(DE) German Gov Spokeman: Volkswagen and Deutsche Bank a source of concern
VOW3.DE: Exec: The total special items relating to diesel issue amounts to €17.8B and all consequences of diesel topic known so far are covered
*(US) SEPT PRELIMINARY MARKIT SERVICES PMI: 51.9 V 51.2E (highest reading since Apr)
*(US) SEPT RICHMOND FED MANUFACTURING INDEX: -8 V -2E
*(US) SEPT CONSUMER CONFIDENCE: 104.1 V 99E (highest since Aug 2007)
TPX: Guides FY16 Rev -3% to -1% y/y (implies R$3.06-3.12B v $3.23Be), cuts adj EBITDA $500-525M (prior $525-550M)
NKE: Reports Q1 $0.73 v $0.56e, R$9.06B v $8.85Be
(CN) China Q3 Beige Book: Q3 growth seen exclusively from old engines - financial press

WEDNESDAY 9/28
*(DE) GERMANY OCT GFK CONSUMER CONFIDENCE: 10.0 V 10.2E
DBK.DE: German Government reportedly working on a contingency plan; Looking at taking a stake in the bank as an option - press
*(US) AUG PRELIMINARY DURABLE GOODS ORDERS: 0.0% V -1.5%E; DURABLES EX TRANSPORTATION: -0.4% V -0.5%E
(US) Fed Chair Yellen: banking system in the US is well capitalized; loan growth is picking up and problem loans are down - testifies before House Panel
OPEC reportedly reaches deal in Algiers to limit oil production, execution of deal in Nov; agrees to limit oil production to 32.5M bpd (v 33.2M in Aug) - press
(US) Senate has sufficient votes to pass stopgap funding measure; would keep govt funded through Dec 9th - press

THURSDAY 9/29
(JP) BOJ Gov Kuroda: Will seek appropriate yield curve for 2% price target - comments from Tokyo
*(EU) EURO ZONE SEPT BUSINESS CLIMATE INDICATOR: 0.45 V 0.05E; CONSUMER CONFIDENCE (FINAL): -8.2 V -8.2E
*(CZ) CZECH CENTRAL BANK (CNB) LEAVES REPURCHASE RATE UNCHANGED AT 0.05%, AS EXPECTED
*(DE) GERMANY SEPT PRELIMINARY CPI M/M: 0.1% V 0.0%E; Y/Y: 0.7% V 0.6%E
*(US) Q2 FINAL GDP ANNUALIZED Q/Q: 1.4% V 1.3%E; PERSONAL CONSUMPTION: 4.3% V 4.4%E
*(US) Q2 FINAL GDP PRICE INDEX: 2.3% V 2.3%E; CORE PCE Q/Q: 1.8% V 1.8%E
*(US) AUG PENDING HOME SALES M/M: -2.4% V 0.0%E; Y/Y: +4.0% V +2.6%E (lowest M/M reading since Jan)
DBK.DE: Reportedly 10 hedge funds have reduced exposure to Deutsche Bank, hedge fund clients have reduced collateral on trades - press
*(MX) MEXICO CENTRAL BANK (BANXICO) RAISES OVERNIGHT RATE BY 50BPS TO 4.75%; AS EXPECTED
COST: Reports Q4 $1.77 v $1.73e, R$36.6B (total) v $36.6Be
CAT: Announces 0-4% price action on most machines; effective Jan 2017 - filing
*(CN) CHINA SEPT CAIXIN PMI MANUFACTURING: 50.1 V 50.1E; 3rd straight month of expansion

FRIDAY 9/30
*(UK) Q2 FINAL GDP Q/Q: 0.7% V 0.6%E; GDP Y/Y: 2.1% V 2.2%E
*(EU) EURO ZONE SEPT ADVANCE CPI ESTIMATE Y/Y: 0.4% V 0.4%E; CPI CORE Y/Y: 0.8% V 0.9%E
*(EU) EURO ZONE AUG UNEMPLOYMENT RATE: 10.1% V 10.0%E
*(US) AUG PERSONAL INCOME: 0.2% V 0.2%E; PERSONAL SPENDING: 0.0% V 0.1%E
*(US) AUG PCE DEFLATOR M/M: 0.1% V 0.2%E; Y/Y: 1.0% V 0.9%E
*(US) AUG PCE CORE M/M: 0.2% V 0.2%E; Y/Y: 1.7% V 1.7%E
*(US) SEPT CHICAGO PURCHASING MANAGER: 54.2 V 52.0E (4th straight above 50 reading)
*(US) SEPT FINAL MICHIGAN CONFIDENCE: 91.2 V 90.0E
DBK.DE: Reportedly nears $5.4B settlement with US officials over mortgage bonds - France press
NTNX: IPO opens for trade at $26.50. Priced 14.9M shares at $16.00