Deutsche Bank

• BoJ minutes are due to be released on Tuesday with multiple central bank speakers on the slate to supplement the calendar
• Investment Banks are in focus as earnings season starts in full swing, with analysts looking for whether the global slowdown had an impact on results

"We believe that the path of least resistance would be to effectively ban capitalism and by-pass banking and capital markets altogether. We gave this policy change several names (such as “Cuba alternative”, “British Leyland”) but the essence of the new form of QE would be using central banks and public instrumentalities to directly inject “heroin into blood stream” rather than relying on system of incentives to drive investor behaviour."

The warnings are getting louder.  Is anybody listening?

Hot on the heels of Deutsche Bank's admission that all is not well, Credit Suisse's announcement last night of a major capital raise was greeted by buying pressure from investors. However, reality punched them in the face this morning as CS releasaed its investor day details and, as Bloomberg reports, is looking to raise up to CHF8 billion (almost 50% larger than Goldman Sachs investor survey suggested). Clearly, CS' has a much more massive capital shortfall than expected.

Investors should hope for the best while making preparations for less benign scenarios. This can be achieved by reducing leverage and speculation and having a healthy allocation to physical precious metals in the safest vaults in the world.

Last month, when King Salman arrived in Washington to a fleet of Mercedes S-Classes, we asked if, considering the current circumstances, cutting back on spending might be in order. Indeed, in the wake of Saudi Arabia's move to tap debt markets, rumors have been circulating for months that the kingdom has enlisted the help of "advisers" to help rein in the ballooning deficit. Now, Riyadh has effectively declared a spending moratorium in the face of self-inflicted crude carnage.

Not everything is "fine" in the land of European banks, in fact quite the opposite.

Like other banks, Deutsche has been caught up in the Libor-rigging scandal, and faces another investigation in Switzerland for suspected price-fixing in the precious metal market.

Gillian Tett, ourselves and many others have warned that Deutsche and its massive derivative book has the potential to be a ”European Lehman Brothers”. Is Deutsche Bank, the largest holder of Warren Buffett’s “financial weapons of mass destruction” derivatives in trouble?

• Congress probing U.S. spy agencies' possible lapses on Russia (Reuters)
• Defense Ministers From NATO Hit Out at Russian Action in Syria (WSJ)
• U.S. Rules Out Cooperation With Russia as Moscow Launches First Naval Strikes on Syria (WSJ)
• Man Who Called China's Boom and Bust Says Use This Rally to Sell (BBG)
• For Volkswagen, New Questions Arise on U.S. Injury Reporting (BBG)
• Deutsche Bank May Swell $14 Billion Selloff in China Bank Stakes (BBG)
• Emerging market slowdown hits German exports (FT)

It was supposed to be the day China's triumphantly returned to the markets from its Golden Holiday week off, and with global stocks soaring over 5% in the past 7 days, hopes were that the Shanghai Composite would close at least that much higher and then some, especially with the "National Team" cheerleading on the side and arresting any sellers. Sure enough, in early trading Chinese futures did seem willing to go with the script, and then everything fell apart when a weak Shanghai Composite open tried to stage a feeble rebound into mid-session, and then closed near the day lows even as the PBOC injected another CNY120 bn via reverse repo earlier.

Deutsche Bank warned it expects to record a third-quarter loss of $7 billion, tied to a huge write-down in its corporate-banking-and-securities segment.  The bank said the charges are driven by the impact of expected higher regulatory capital requirements and its disposal of Postbank. It also said it will consider reducing or eliminating its common dividend for fiscal 2015.

DEUTSCHE BANK SEES 3Q NET LOSS EUR 6.2 BLN
DEUTSCHE BANK TO RECOMMEND DIVIDEND CUT OR POSSIBLE ELIMINATION

"The collapse in inflation expectations tells us that the market believes the central banks, despite their monetary profligacy, are failing to prevent the western economies from turning Japanese, and thus at risk of repeating their devastating slide into outright deflation in the 1990s."

In the real world, any casino (legal or otherwise) which refused to pay when the “house” lost would quickly be driven out of business

While Reverse QE, or QT, or whatever one wants to call it has become traditionally associated with Emerging Markets and petroleum exporters, nobody had linked it with one of the most advanced Developed Markets in the world which also happens to be an oil exporter, the market with the largest sovereign wealth fun in the world: Norway. That is about to change because as Bloomberg report, "the future may already be here", a future in which Norway's gargantuan $830 billion sovereign wealth fund, the product of two decades of capital accumulation courtesy of Norway's vast petroleum reserves and oil trade, is forced to begin liquidating its vast assets.

News That Matters