Deutsche Bank

DOJ Launches Criminal Investigation Into Deutsche Bank Russian Trades

Just days after WSJ revealed that Deutsche Bank's $2.5 billion LIBOR settlement could be in jeopardy due to the apparent mishandling of chat records dating back to 2005, Bloomberg says Loretta Lynch’s Justice Department has launched a criminal probe into the bank’s alleged role in facilitating a series of trades which may have allowed Russian clients to launder billions through the bank's trading desks.

Frontrunning: July 31

  • U.S. stock futures slip amid lukewarm earnings, fall in commodities (Reuters)
  • Stressful times for low-polling Republicans who may miss debate stage (Reuters)
  • Trump shows staying power with surge ahead of first debate (Reuters)
  • China Market Manipulation Probe Targets Spoofers After Crash (BBG)
  • Beijing Chosen to Host 2022 Winter Olympics (WSJ)
  • Obama Warns Support on Iran Deal ’Getting Squishy’ Amid Pressure (BBG)
  • Pacific trade negotiators chase elusive final deal in tough talks (Reuters)

Chinese Stocks Drop, End Worst Month Since August 2009; US Equity Futures Flat

In a repeat of Thursday's action, Chinese stocks which had opened about 1% lower, remained underwater for most of the session before attempting a feeble bounce which took the Shanghai Composite fractionally into the green, before the now traditional last hour action which this time failed to maintain the upward momentum and the last day of the month saw a surge in volume which dragged the market to its lows before closing roughly where it opened, -1.13% lower.  This caps the worst month for Chinese stocks since since August 2009, as the government struggles to rekindle investor interest amid a $3.5 trillion rout, one which has sent the Shanghai market lower by 15% - the biggest loss among 93 global benchmark gauges tracked by Bloomberg.

Former FDIC Head Sheila Bair Resigns From Parent Of World's Largest Subprime Auto Lender

Just days after Blythe Masters took up her role as Chairman of Santander Consumer - the world's largest subprime auto lenders; former FDIC head Sheila Bair has resigned her position on the board of Banco Santander citing excess "travel" as a reason. One cannot help but wonder if the clash of the titans was too much, if the embrassment of a failed stress test was unbearable, or if Ms. Bair sees the rapidly approach light at the end of the tunnel of subprime lending for what it is... a bigger train that 2008's.

Chinese Stocks Tumble In Close Of Trading "Causing Panic", US GDP To Be Revised Higher On Seasonal Adjustments

We start off the overnight wrap up with the usual place, China, where in a mirror image of Wednesday's action, stocks once again started off uneventful, then gradually rose in the afternoon session and meandered near unchanged territory until the last half hour, when out of the blue they tumbled to close near the day's low, some 2.2% below yesterday's closing level.  What caused it?  One possible catalyst came from Reuters which reported that that Chinese banks were investigating their exposure to the stock market via wealth management products and loans backed by stock as collateral. 

This Is The Biggest Paradox Facing The Fed Ahead Of Its Rate Hike Decision

Here is the paradox as succinctly summarized by Deutsche Bank, which notes that the current -29% year-over-year drop in the CRB index implies YoY headline CPI inflation falling from 0.1% to -0.9% over the next couple of months, or just in time for the September or December FOMC meetings both proposed as the "lift off" date. This would be the largest year-over-year drop since September 2009 (-1.3%) and one of the lowest prints in modern history.

The Fate Of China's Monetary Policy Is In The Hoofs Of Pigs

It seems China's efforts to stabilize their economy stock market knows no bounds - nowhere better exemplified than the 5% spike in an hour last night after injecting $100bn into the sovereign (rescue) fund - and western observers applaud the efforts as if they are costlessly saving the world. However, there are costs to all this leveraged asset bubble creation (and maintenance) and, as China People's Daily reports, nowhere is that more evident than the surging price of pork (on if China's main CPI components). As Deutsche Bank warns, in the past 15 years, the PBoC has never cut interest rates when inflation was picking up (whether driven by food or more broad-based); so the fate of an 'easy money' inspired stock market bubble remains in the hands hoofs of pigs as the policy stance will be forced to turn from loosening to neutral in Q4 as inflation rises.

Potential outcomes from the upcoming FOMC rate decision...

The FOMC are to hold their July policy meeting on Wednesday at 1900BST/1300CDT with the overwhelming consensus being that the Fed will once again keep rates at their record low with attention more so on subtle tweaks to the statement given the broader consensus of a September move and given that this month there will be no projections or press conference.

Compromised Hedge Funder Joins BOE In Revolving Door Roundtrip

A former BOE employee and Mervyn King speechwriter who went on to a lucrative private sector career as a bond strategist at Deutsche Bank, and then as a hedge fund economist, is now going back to the BOE as a voting member. And that's not all. This revolving door story has a punchline...

Knife-Catching Hedge Fund Oil Bulls Dump Crude At Fastest Pace In 3 Years

Hedge Funds' net long position in WTI Crude collapsed 27% (the biggest single 'dump' in over 3 years) ahead of the big plunge last week (and is now down almost 60% in the last month - the most since 2010). Part of a broader deflationary collapse in commodities, as Bloomberg reports, long positions dropped to a two-year low while short holdings climbed 25%, erasing more than $100 billion in market value from the 61 companies in the Bloomberg E&P stock index. With crude supplies still almost 100 million barrels above the five-year average, "there's a lot more room for prices to slide," warned one trader, "it's going to take a long time for this to work itself out."

Nothing To See Here: German Regulator Decides Deutsche Bank CEO Didn't Know About LIBOR After All

"German banking regulator Bafin cleared former Deutsche Bank AG co-Chief Executive Officer Anshu Jain of misleading the Bundesbank about his knowledge of the company’s role in attempts to manipulate benchmark interest rates," Bloomberg reports. This comes just three months after the very same regulator said that "Mr. Jain has been proven to have learned about discussion in the market concerning the susceptibility of the LIBOR to manipulation in 2008."

Central Banks And Our Dysfunctional Gold Markets

Many investors still view gold as a safe-haven investment, but there remains much confusion regarding the extent to which the gold market is vulnerable to manipulation through short-term rigged market trades, and long-arm central bank interventions. First, much of the gold that is being sold as shares, in certificates, or for physical hoarding in dubious "vaults" just isn't there. Second, paper gold can be printed into infinity just like regular currency. Third, new electronic gold pricing — replacing, as of this past February, the traditional five-bank phone-call of the London Gold Fix in place since 1919 — has not necessarily proved a more trustworthy model. Fourth, there looms the specter of the central bank, particularly in the form of volume trading discounts that commodity exchanges offer them.Today, there is no “official” price for gold, nor any “gold-exchange standard” competing with a semi-underground free gold market. There is, however, a material legacy of “real versus pseudo” gold that remains a terrible menace. Buyer beware of the pivotal difference between the two.

Why Most Companies "Beat" Earnings Expectations - Explained In One Chart

When it comes to corporate earnings announcements, some two-thirds of the time companies beat consensus expectations. This happens both during good quarters and bad (such as this one). How is this possible? The following chart form Deutsche Bank explains it once and for all.