After the Germany 30 collapsed around 9.30am on Monday morning, it has slowly recovered after using the 50-DMA as support.
Banks have led the Germany 30 lower after markets have digested the news that Deutsche Bank AG has improved its capital with a cash injection. Additionally, the Qatari royal family announced they will take up their €1.75 billion allocation in the upcoming rights issue. They have also stated their intention to subscribe for more shares in the corporate action. The bank has claimed that this has not occurred from requests by regulators, but in a pre-emptive move to ensure they stay ahead of requirements.
Once again markets are interpreting good news as bad news. The extra cash will improve the bank’s tier one ratio, but the market consensus that the bank feels it needs to do this is worrying. As a consequence, the markets have also thumped shares in Commerzbank.
Traders have been slow to regain the optimism of last week’s high in the DAX, where it traded above 9770 and its January highs. So far in 2014 we have seen a sequence of higher lows as the index has failed to cut loose, and this pattern is continuing.