Financials Weigh on European Stocks Despite Boost from U.S. Markets

European stock markets lost early gains and the selloff deepens. Deutsche Bank AG hit fresh record lows. Deutsche Bank said there was no need for the German government to help with the USD 14 billion demand from the U.S. to settle claims it erroneously sold mortgage backed securities, but that only added to concerns sparked by a magazine report Monday saying that Merkel didn’t plan to bail out the bank. It seems there is little doubt that more capital will be required and with the ECB once again ruling out a move into bank bond purchases, markets will need clarification over where the funds will come from before easing the pressure on the lender.

The DAX is currently down -0.82%, in early afternoon trade while the FTSE 100 is outperforming with a -0.20% loss. U.S. stock futures are slightly higher as investors welcomed the U.S. presidential debate, where Clinton was seen as the winner. Oil prices meanwhile are down on the day.

UK CBI distributive sales survey missed expectations in the September report, dropping to a headline sales reading of -8 after +9 in August. The reading for expected sales in the month ahead was +7, though the volume of orders placed upon suppliers fell for a sixth straight month, coming in this month at -8.

It appears that at least one gauge of European inflation data is rising. Eurozone M3 money supply growth accelerated to 5.1% year over year in August from 4.9% year over year in the previous month. The counterparts showed that growth in lending to non-financial corporations slowed to 1.2% year over year from 1.3% year over year, while lending to household expanded at a steady rate of 2.0%. Lending for house purchases picked up again, as did consumer credit growth, which underpins expectations of still robust demand going ahead. The monthly flow in lending to non-financial corporations was negative though, which ties in with the dip in confidence that month and could suggest that companies were hesitant with investment decisions as the Brexit implications were being evaluated.

Inflation was slightly higher when it comes to import prices into Germany. German import price inflation rose to -2.6% year over year from -3.8% year over year, despite a drop of -0.2% month over month in prices over the month. Base effects from a robust EUR and the stabilization in oil prices are bringing the headline up from the last low of -6.6% year over year back in April. Still, with the annual rate stuck in negative territory the numbers confirm that deflation risks are easing, but also that overall inflation is likely to remain low for some time to come.

U.S. futures prices are higher following Monday’s first debate between major Presidential candidates.  The consensus was the Clinton was poised and presidential while Trump was himself.  His expressions and interruptions were a style never seen before in presidential debates. Going into the debate pundits were wondering whether Candidate Trump would change his tune on Trade, taxes, and how he views the responsibilities of other countries.  It does not appear that he could. Clinton also said that, Trump would cut taxes for the rich in “trumped up” trickle-down economics, which appears to be a new term she has coined.