Deutsche Bank Sell-Off Sends CAC Lower

The CAC index has posted losses in the Friday session. Currently, the index is at 5385.25, down 1.27% on the day. A sharp loss in Deutsche Bank shares has dragged European stock markets lower. On the release front, there is just one event out of the eurozone. The Producer Price Index edged lower to 0.2%, missing the estimate of 0.4%. Later in the day, the US releases nonfarm payrolls, which is expected to improve to 181 thousand.

European stock markets are in the red on Friday, reacting to dismal news form Deutsche Bank, the largest bank in Germany. Shares of the giant German bank are currently down 5.5% on the day, and the stock price hits at its lowest level since November. The giant bank posted its third straight annual loss in 2017. The fourth quarter was weak, with a decline in investment bank revenue and the US tax reform bill weighing on share price. The French banking sector is also under pressure on Friday, with BNP Paribas and Credit Agricole showing daily losses of  1.01% and 1.08%, respectively. All listings on the CAC are in red territory and all but one are currently listed as a “strong sell”, so the CAC could continue to lose ground during the day.

The ECB recently extended its asset-purchase program (QE) in September, but what happens after that? With the eurozone economy continuing to perform well, there has been speculation that the ECB could simply wind up QE and shift to a normative policy, and perhaps raise interest rates. However, Mario Draghi and other ECB members have taken pains to reiterate that the Bank is in no rush to end monthly asset purchases. On Wednesday, executive board member Benoit Coeure joined the chorus, saying that although QE “will not last forever” policymakers were in agreement “that we have to be patient and prudent because we are not yet where we want to be in terms of inflation”. Investors would be well advised to keep a close eye on eurozone and German inflation numbers, as QE could be extended beyond September if inflation remains well below the ECB target of around 2.0%.

Economic Calendar

Friday (February 2)

• 5:00 Eurozone PPI. Estimate 0.3%. Actual 0.2%
• 8:30 US Nonfarm Employment Change. Estimate 181K

*All release times are GMT

*Key events are in bold

CAC, Friday, February 2 at 6:55 EDT

Open: 5435.80 High: 5437.80 Low: 5375.70 Close: 5385.25

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