Deutsche Bank Revives the Ghost of Lehman Brothers

Shares of Deutsche Bank plummeted in early Friday trade following reports that a large number of hedge funds were trimming their exposure to the German financial giant. The bank has seen its borrowing costs steadily rise on the face of a potential $14 billion fine from the US Department of Justice.  Deutsche Bank’s inability to raise enough cash to tide over the current crisis has fuelled speculation that Europe’s embattled banking sector could come under greater stress if the German government does not intervene. Analysts say the situation could get much worse for European banks as they grapple with eroding profits amid ECB’s negative interest rate regime.  Already, German peer Commerzbank has announced plans to cut 9600 jobs and scrap the dividend in an effort to shore up its own finances. The DAX 30 index is trending back above 10,200 after briefly falling below the support level.

According to the latest manufacturing survey of factories around the country, China's small and medium-sized firms expanded in September.  The Caixin/Markit manufacturing PMI came in at 50.1 for this month, a tad above last month’s reading of 50.0 reading, but still below July's 50.6. Although a reading above 50.0 indicates expansion, the tepid pace suggests that manufacturing has not fully recovered.  The latest report comes at a time when economists are divided about the growth outlook of the world's second-biggest economy.  On one hand, last month saw industrial firms record their fastest profit growth in three years. But worries of a property market bubble linger as average home prices continue rising, spiking 9.20% in August.  Mainland equity benchmarks edged slightly higher following the release, with the Shanghai Composite up 0.20%.