Article / 10 February 2016 at 9:19 GMT

From the Floor: Deutsche Bank plunge 'not justified'

Head of Editorial Content / Saxo Bank
Denmark
  • Risk-off continues in Asia, Nikkei loses over 4% before recovering into close
  • Testimony from Fed chair Yellen 'a crucial pivot point' for markets: Hardy
  • Denmark-based Pandora 'can't escape the slowdown': Garnry
  • German bond yields moving higher from short-term low: Boye

From the Floor
By Michael McKenna

World markets are still waiting for the other shoe to drop, but the big German boot that is Deutsche Bank is hardly undone – it just needs a bit of a polish, says Saxo Bank head of equities strategy Peter Garnry.

"Deutsche Bank is now at a level that is lower than the one seen in 2011 when we thought the whole system was going to fall apart," says Garnry, adding that it is presently in line with the lows seen at the nadir of the last financial crisis in 2009.

Looking at the numbers, continues Garny, DB's "underlying core earnings are sufficient to support a a higher valuation – I think [the present panic] is completely overblown.

Deutsche Bank shares are presently trading around €13.

Deutsche Bank

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Source: Saxo Bank 

In other single-stock stories, Garnry reports than Copenhagen-based Maersk and Pandora have both released new figures supporting a weak overall outlook with the former weighed down by low oil prices and the latter posting a deteriorating cashflow.

"I think something is brewing [with Pandora]," Garnry concludes; "it can't escape the slowdown."

Elsewhere, today's Asian session showed that yesterday's flight from stocks remains in full force as the Nikkei followed Tuesday's 5.40% drop with a further 4% plunge as of midday, but the benchmark Japanese index did recover somewhat into the close, ultimately clocking in with a 2.31% loss.

While most of Asia remains closed for the Lunar New Year, reports Saxo trader Christoffer Moltke-Leth from Singapore, the Australian ASX 200 followed Japan's lead with a 1.17% decline.

In both Australia and Japan, notes Saxo head of FX strategy John J Hardy, the equities losses came on the back of currency rallies with both the AUD and the JPY gaining ground against the USD.

The greenback, in fact, is broadly softer ahead of today's testimony from Federal Reserve chair Janet Yellen. Markets, it would appear, are expecting a dovish move from the Fed in response to the current sentiment woes, but given the inefficacy of recent moves from the central banks of both Europe and Japan, Hardy is left to wonder if markets "can even gain anything from [Yellen's] address".

"Either we accelerate to the downside here or [Yellen's speech allows us to] find some reason for confidence," says Hardy, pointing out that a continuation of present themes would place the 115.00 area in focus for EURUSD.

Saxo fixed income trader Michael Boye echoes Hardy's statements on the centrality of today's address of the Fed, noting as well that German yields have moved higher from short-term lows in early European trading.

"Investors should stay alert here," cautions Boye, adding that Yellen's remarks could surface in written form – and move prices – before the Fed chair's televised address.

Deutsche Bank




















Will the sun shine on Deutsche Bank in today's session? Photo: iStock

Michael McKenna is an editor at TradingFloor.com 

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Editor’s note: From the Floor takes advantage of TradingFloor.com's unique real-time access to Saxo Bank’s various trading desks around the globe to put our community in touch with the developments that matter to their portfolios. 

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