BERLIN-The German government expects a U.S. Department of Justice investigation into Deutsche Bank’s selling of mortgage-backed securities to result in a fair settlement, a spokeswoman for the German finance ministry said Friday.
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Deutsche shares slapped lower: Financial stocks were the worst performing, helping to push the Stoxx Europe 600 Bank Index down 1.9%.
The Justice Department is seeking a settlement over the bank’s handling of home mortgage-backed securities and “related securitization activities” from 2005 to 2007, according to Deutsche Bank.
The Dow Jones industrial average fell 88.68 points, or 0.49 per cent, to close at 18,123.8, the S&P 500 lost 8.1 points, or 0.38 per cent, to end at 2,139.16 and the Nasdaq Composite dropped 5.12 points, or 0.1 per cent, to finish at 5,244.57.
“The negotiations are just beginning”.
The U.S. -listed shares of Deutsche Bank, the German financial conglomerate, plunged $1.30, or 9%, to $13.46 after the bank said it did not intend to pay the $14 billion settlement that the Department of Justice had proposed.
Europe’s bank index fell 2.1 percent, dragged down by declines of between 2.5 percent and 4.4 percent for shares of Royal Bank of Scotland, Credit Suisse and UBS, which also face litigation over mortgage-backed securities.
The U.S. government is now demanding $14 billion from the bank, slightly less than the $16.9 billion settlement Bank of America made in 2014.
Since he took over past year, John Cryan, Deutsche’s chief executive, has said he aims to settle major outstanding legal issues as soon as possible as part of his wider overhaul.
The DAX of Germany dropped 1.49 percent and the CAC 40 of France fell 0.93 percent. US stocks are slightly higher in early trading Wednesday, Sept. 14, 2016, as utility companies climb.
The yield on the 10-year Treasury note held at 1.69 percent. The uncertainty that has returned to global financial markets comes as central banks signal they are rethinking their approach to the monetary stimulus that’s bolstered assets from stocks to bonds for the past half decade. Shares also were higher in Indonesia and Singapore. The Bank of Japan and the Federal Reserve will meet next week, with investors watching to see if the Fed will go against market expectations and raise interest rates.
Brent crude LCOc1 settled down 82 cents, or 1.76 percent, at $45.77 a barrel, while US crude CLc1 settled down 88 cents, or 2 percent, at $43.03.
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The data and contrasting comments from Fed officials on rate hikes have caused the markets to oscillate and volatility to spike in the past few days. Heating oil fell 1 cent to $1.41 a gallon, wholesale gasoline rose 3 cents to $1.46 a gallon and natural gas rose 2 cents to $2.948 per 1,000 cubic feet.
