Stocks rebound in Deutsche Bank-led volatile trading

US and eurozone shares pushed higher on Friday in volatile trading buffeted by Deutsche Bank's woes whose shares also rallied off historic lows that had sent ripples of fear across the global finance sector. 

The troubled German lender found itself again in the spotlight, setting the tone for markets across the world, with its shares rounding off a turbulent week 6.4% higher.

The surprise rally in the last minutes of Frankfurt trading came after a person familiar with the matter told AFP that Deutsche Bank was near a deal with US officials to slash a huge fine over its bond dealings.

The lender is close to settling the fine over its sales of toxic mortgage bonds ahead of the financial crisis for $5.4 billion, well below the government's initial $14-billion demand, the source said.

Frankfurt and Paris stock markets reversed direction from earlier in the day to end the week in the black, while London's FTSE 100 remained in negative territory.

CMC Markets analyst Jasper Lawler said in an investor's note that even at $5.4 billion, Deutsche Bank would likely have to raise capital, "though the size may make a rights issue more palatable and makes a government bailout much less likely".

Earlier stocks in Deutsche Bank had plunged by more than 9.0% at one point, hitting a historic low of 9.90 euros on widening concerns about its financial strength.

There had been fears the fine could batter the already fragile firm, fuelling talk that it would become another Lehman Brothers, the Wall Street titan whose downfall precipitated the global downturn six years ago.

AFP sources knowledgeable of the situation confirmed 10 funds had pulled investments, but the bank said the report gave an overly negative view of the situation, noting it still had some 800 funds as customers who understand its "stable financial position".

Sea of red to mixed bag 

The wider banking sector, which was earlier a sea of red across trading screens, ended up more of a mixed bag.

Wall Street stocks rose, with US bank shares such as Citigroup and JP Morgan Chase also heading higher.

In Paris, Societe Generale lost 0.1%, while BNP Paribas gained 0.8%.

After earlier tumbling, Italian lender Unicredit ended convincingly higher and Barclays advanced 0.3% in London.

In earlier Asian deals, Japan's Mitsubishi UFJ Financial Group dropped more than 2% and Sydney-listed Commonwealth Bank lost 1.5%.

Italy's Finance Minister Pier Carlo Padoan, whose country is struggling to stabilise its own undercapitalised banks, said Deutsche's woes pointed to a need to strengthen the financial sector across Europe.

"This business is a reminder that we still have great efforts to make to improve the state of the banking system," he told the La Stampa daily.

"All of us need to find solutions that must be managed with the necessary caution."

Offsetting the banks' troubles was official data showing eurozone consumer prices rose to a near two-year high of 0.4% in September.

It offered hope that a disputed programme by the European Central Bank (ECB) to stimulate the economy may be delivering.

British official second-quarter growth meanwhile was revised higher slightly to 0.7% from 0.6%, raising hopes for the economy after the June Brexit vote.

Key figures at 1555 GMT

London - FTSE 100: Down 0.3% at 6,899.33 points (close)

Frankfurt - DAX 30: Up 1.0% at 10,511.02 points (close)

Paris - CAC 40: Up 0.1% at 4,448.26 points (close)

EURO STOXX 50: Up 0.4% at 3,002.24

New York - DOW: Up 1.0% to 18,315.24

Tokyo - Nikkei 225: Down 1.5% at 16,449.84 (close) 

Hong Kong - Hang Seng: Down1.9% at 23,297.15 (close)

Shanghai - Composite: Up 0.2% at 3,004.70 (close)

Euro/dollar: Up at $1.1241 from $1.1223 late Thursday

Dollar/yen: Up at 101.20 yen from 101.04 yen

Pound/dollar: Up at $1.3011 from $1.2968