Stocks rebound in Deutsche Bank-led volatile trading

New York—US and eurozone shares pushed higher 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—$5.4 billion instead of $14 billion—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 Global stocks had been under pressure following a Bloomberg News report Thursday that a handful of hedge funds had withdrawn some money from Deutsche Bank due to worries about its capital position.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 $14 billion 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 $5.4 billion 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. “$5.4 billion dollars they could live with, and so stocks came back up.”
The broad-based S&P 500 climbed 0.8 percent, 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 1.0 percent following a stunning reversal in Deutsche Bank shares.—AFP

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