A major reason behind weak equities today is Deutsche Bank - and not for the first time. The German banking giant is losing ground as the share prices crushed a support at 11.25 euro to head over 4% lower and score fresh all time lows.
Let us recall that Deutsche (DBK.DE on xStation) found itself under a renewed downward pressure when the US Department of Justice proposed a settlement of 14b USD on the mortgage misconduct that the Bank needs to address and compensate for.
While the DB officials expressed outrage when it comes to the scale of the settlement and they saw it more like around 2-3b USD, the market simply fears that a 5.5bEUR litigation reserve will be far too small given other probes that the Bank is facing.
Because eventual charges might be higher and the Bank is not making profits at the moment, fresh capital injections will be needed. The problem is that the Bank is 10 times cheaper than at the peak from 2007 and 3 times than just in July 2015! The assumption was that the German government would offer the Bank a helping hand but Angela Merkel ruled that out over the weekend, leading to a declines that we see today.
DB Chart - 15min