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U.S. Stocks Rally after Deutsche Bank Shares Rebound

By:
James Hyerczyk

U.S. equity markets have fought back from early session weakness to move higher for the session. The Dow Jones Industrial Average is now trading over 100

U.S. Stocks Rally after Deutsche Bank Shares Rebound

U.S. equity markets have fought back from early session weakness to move higher for the session. The Dow Jones Industrial Average is now trading over 100 points higher. The benchmark S&P 500 is up about 0.5 percent and the NASDAQ Composite rose about 0.3 percent.

Early in the session, global equity markets in Asia and Europe fell sharply, dragging the U.S. markets with them as investors reacted to reports that hedge funds were pulling money and transferring positions out of beleaguered Deutsche Bank.

The markets began to turn higher after investors started to buy shares in the bank, following the release of a supportive letter from the bank’s CEO to employees. The internal letter stated that Deutsche had strong fundamentals and that recent media reports were causing “unjustified concerns”.

U.S. Economic News

In economic news, personal spending remained flat in August. Personal income rose 0.2 percent. The core PCE, the Fed’s preferred inflation measure, rose 0.2 percent. Other data released Friday included the final read for Michigan consumer sentiment and the September Chicago PMI, both of which beat expectations. Chicago PMI came in at 54.2 versus a 52.1 estimate. University of Michigan Consumer Sentiment was 91.2 versus a 90.1 forecast.

Traders showed a limited reaction to the news since the main focus was on the events concerning Deutsche Bank. Additionally, based on the recent Fed statement, many investors feel the Fed is more focused on labor rather than inflation.

Currencies

The EUR/USD sold-off sharply as investors bailed on the currencies due to the problems with Deutsche. The price action suggests investors were selling Euros as they were taking money out of the bank and returning it to domestic banks.

The Swiss Franc was also in the news on Friday. During the session, the Euro hit a two-month low against the Swiss Franc, but recovered on speculation that the Swiss National Bank was preparing to intervene to cap the currency’s strength.

The USD/JPY started to feel pressure after an earlier rally as investors pulled out of stocks and bought the Yen for safety. A stock market rally could lead to a reversal of this trade which would fuel renewed pressure on the Japanese Yen.

Gold

December Comex Gold futures rallied despite a stronger U.S. Dollar. Gains may have actually been limited by the strength in the dollar. A recovery in the U.S. equity markets could also lead to renewed pressure on gold. Any more new revelations about Deutsche Bank could bring investors back into gold for protection.

About the Author

James is a Florida-based technical analyst, market researcher, educator and trader with 35+ years of experience. He is an expert in the area of patterns, price and time analysis as it applies to futures, Forex, and stocks.

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