From OPEC To Deutsche Bank: Wider Implications

  • Two very significant events in the week will have implications beyond their immediate markets.
  • OPEC’s agreement to cut production, although ineffective in itself, is a trigger for something more significant.
  • Deutsche Bank was magically saved by accommodating stance of DoJ, yet the episode highlights the vulnerabilities and the mechanism of a global financial distress.

Events that find their way to the daily headlines have direct and apparent impact on many investors. These events move stocks, indices and markets instantaneously. But there are also second and third-degree impacts that become evident only after a while. Understanding these impacts and potentially converting them into trades can help translate the daily events: anything from OPEC’s agreement to cut oil production to the troubles and then the magic rescue of Deutsche Bank (NYSE:DB), into actionable intelligence.

OPEC agreement

While oil traders, analysts and consuming industries are still coming to terms with the unexpected agreement at OPEC to limit production to 32.5 million barrels per day, the oil price is already up by ~8%.
The fact that the decision is not yet implemented and clearly lacks any implementation mechanism (suffices to say that OPEC member countries have not yet agreed an allocation of cuts – that is yet to be decided), scarcely dampened the bullish oil sentiment. Although many are inclined so, it is not wise to chuck it down to the naïve market participants – the wisdom of crowds must have picked up on lack of credibility.
Deutsche Bank
As it appears in the nick of time Deutsche Bank managed to secure a very amicable settlement with the Department of Justice (DoJ) of “only” $5.4 billion versus the earlier requested $14 billion. Good news of course and a remarkably co-operative DoJ stance, but what really just happened and what was averted, and more importantly, what to watch for going forward?
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