Publications
Partners
New York - US and eurozone shares pushed higher Friday in volatile trade driven by Deutsche Bank's negotiations to settle US charges over its sale of toxic mortgage bonds before the financial crisis.
News that Deutsche Bank was close to a much lower settlement than expected - $5.4bn instead of $14bn - with US officials on the long-standing case sparked a rally on Wall Street, with large US banks leading the broader market as worries of a Lehman-style collapse receded.
The German DAX also finished solidly higher, while the euro gained on the dollar.
Global stocks had been under pressure following a Bloomberg News report Thursday that a handful of hedge funds had withdrawn some money from Deutsche Bank due to worries about its capital position.
The US Department of Justice had targeted the German bank to pay $14bn to settle the case concerning allegations the German bank knowingly sold toxic mortgage-backed securities between 2006 and 2008 that helped lead to the financial crisis.
But on Friday, a person familiar with the matter told AFP that the German bank is near an agreement to pay a much more manageable $5.4bn to resolve the case.
"That is low enough that the bank is not likely to have significant capital needs," said Chris Low, chief economist at FTN Financial. "$5.4bn dollars they could live with, and so stocks came back up."
The broad-based S&P 500 climbed 0.8%, with large US lenders Bank of America and Citigroup both climbing more than three percent.
Other strong stocks in the US included retailers Costco Wholesale and Wal-Mart Stores, and the oil giants ExxonMobil and Chevron.
Frankfurt reversed early losses, finishing up 1% following a stunning reversal in Deutsche Bank shares.
Frankfurt-listed shares of the German bank finished up 16.1% at €11.71 after earlier falling to an historic low of €9.90.
The CAC in Paris advanced 0.1%, while the FTSE in London lost 0.3%.
Earlier, Asian markets had fallen sharply on worries about Deutsche Bank, with Japan's Nikkei sliding 1.5%.
