Deutsche bank has faced a fresh setback by the rating agency
The populist party over in Italy surged to power
Pain and more pain that is what Deutsche Bank’s investors are felling and it appears that there is no shortage of bad news. The new CEO of the bank has faced a fresh setback by the rating agency. The S&P Global Ratings cut the bank’s credit rating to BBB+ because of the restructuring. But remember that bad days are followed by good ones and we have seen this episode way too many times when the rating agencies have taken this path and then did the U-turn.
Yes, it is not a comfortable sing for investors to see the credit rating of their bank sitting at the third-lowest investment grade but I do believe that management is taking tough actions to resolve the issues. The lower rating grade would increase the borrowing cost for the bank but given that the bank already wants to close the operations in areas where it is not profitable, an increase in borrowing cost would not have a much detrimental effect.
Although, it is a sad thing that Deutsche bank is moving away from most of the trading business and we have banks like Goldman Sachs performing extremely well especially in the commodity trading area where its commodity trading revenue for this year has already exceeded the total commodity trading revenue of the last year.
The populist party over in Italy surged to power imposing more risk to core fundamentals of the Eurozone. The Five Star Movement and League parties swept to power and this means that there would be more friction with Europe. Giuseppe Conte will become the prime minister today and Paolo Savona will be responsible for the EU affairs. Markets have been wary and we have seen the reaction from the investors throughout this week, it wasn’t encouraging.
Over in Spain, Spanish Prime Minister is also in turbulent time, the corruption drumbeat is all you can hear. There is no doubt that the Prime Minister has pulled the country out of its dark the economic rebound triggered by his efforts is now in its fifth year. Nonetheless, the euro is holding on its gains ahead of the important data release which could potentially impact the price. The manufacturing PMI numbers for Spain, Germany, Italy, Spain and for the Eurozone are due later. An uptick would in te manufacturing PMI across the board would encourage euro bulls.
