The pound has recovered to just above $1.30, and European markets got off to a mixed start. The FTSE 100 had opened strong, but shed its gains later in the morning, down 0.27 percent a couple of hours after opening. The German DAX is down by 0.86 percent, and the French CAC 40 is up by 0.47 percent.
Deutsche Bank continues to extend its losses. The bank had opened in positive territory, but fell by 2.5 percent, to a new record low. Analyst David Buik of Panmure Gordon noted that the markets need confirmation that the bank is well, after the news broke that German Chancellor Angela Merkel had ruled out the possibility of the government providing aid for the lender.
He said that CEO John Cryan, who took over the bank in June, inherited a difficult situation, and it is clear that the bank needs more capital. Buik does not believe that Merkel would let the bank fail if there was a real problem, because he sees that as being a bigger potential catastrophe than the Lehman Bros. If the bank collapses then that would have far reaching consequences, and itís clear that the markets know this, since the banking sector as a whole suffered on Monday, losing £23 billion. The markets will need clarity to avoid continued losses.