Stock markets slump following concerns over Deutsche Bank

"Deutsche Bank, which is in many ways Germany's flagship bank, is coming under increasing pressure in the wake of being slapped with a $14 billion fine from United States regulators and news that hedge funds are selling out", said Richard Perry, market analyst at Hantec Markets, in a note.

The only fallers on the Dow were Goldman Sachs, down 0.14% and Microsoft, which shed 0.09%.

All three major indexes tallied their strongest quarterly gains since Q4 2015, with the Nasdaq rallying 9.7%, the S&P rising 3.3% and the Dow adding 2.1%.

It comes over worries about the lender's viability after USA authorities slapped it with a US$14-billion (16.2-billion-euros) penalty over its sale of mortgage-backed securities prior to the 2008 financial crisis.

The bank is the largest lender in Germany, and investors are anxious about not just its stock price, but the effect on the financial system if Deutsche Bank runs into serious trouble and the government does not help it.

The MSCI world equity index, which tracks shares in 45 nations, rose 0.77 points or 0.18 per cent, to 418.38.

Federal Reserve Atlanta president Dennis Lockhart said the U.S. central bank is nearing its goals of maximum employment and steady inflation close to two percent, while Kansas City Fed president Esther George said she supports tighter policy. That's the sound of Deutsche Bank investors breathing a huge sigh of relief after the lender's stock went on a wild ride on Friday.

The dollar index, which measures the greenback against a basket of six major currencies, was last down 0.09 percent at 95.449. Oil prices surged earlier this week after the nations of OPEC, which collectively produce more than third of the world's oil, agreed to a small cut in production in a surprise decision Brent crude, the worldwide benchmark, fell 67 cents to $49.14 a barrel in London.

Japanese consumer prices in August fell 0.5 percent from a year earlier, missing expectations.

Shares received another boost and closed up 6% after a report claimed that Deutsche Bank had reached a deal to settle legal claims in the US for a smaller amount than expected.

With positive turnaround in stock prices, traders reduced their safe-haven holdings of low-yielding U.S. and German government bonds.

Deutsche Bank (DB) has become the focus of the latest banking fear in Europe, some eight years after the financial crisis in the US that was sparked by mortgage loans going bad. While output and new export orders rose, new orders eased and employment fell marginally less than in a month earlier.

Brent crude LCOc1 settled down 18 cents or 0.37 percent lower at $49.06 a barrel, but USA crude CLc1 settled 41 cents or 0.86 percent higher at $48.24. He said the euro was finding strong demand between $1.1150 and $1.1160.

The dollar rose to 101.41 yen from 101.07 yen.

Other euro zone bond yields also gave up earlier falls which had pulled Ireland's 10-year bond yield to a record low of 0.312 percent.

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