Need to Know: Why a Deutsche Bank bust wouldn’t be as bad as Lehman’s

It’s looking nicht so gut on this quarter’s last day, as Deutsche Bank’s woes keep weighing heavily on markets around the world.

“What must be understood here is that Deutsche Bank is the main clearing house for trades in Europe,” stresses Panmure Gordon’s David Buik. He adds that German officials are “totally incapable of even understanding how to deal with this crisis.”

Circling the wagons, the German bank DBK, -2.57% DB, -6.67%  says it has “a perception issue” (ya think?), and CEO John Cryan is complaining about “unjustified concerns.”

That’s as Deutsche Bank clients flee and its Frankfurt-listed shares briefly undercut the 10-euro level this morning. At this rate, the famously aggressive bank easily could end up meeting the definition of a pfennig stock.

Yes, there is something particularly hubristic about a German bank causing all this angst. And it does look like Angela Merkel — Time’s Person of the Year just a few months ago — could be making yet another mistake, in what looks like a win for the Magazine Cover Indicator.

“It would be eminently reasonable for equities to slide further than they’ve recently done if a major global bank goes to the wall,” says financial blogger Macro Man, who provides our call of the day.

He warns “the descent into the vortex is rarely slow and measured,” but also argues it’s no Lehman moment, which echoes one prominent UBS exec’s view and contradicts other folks. More from Macro Man below.

Our chart of the day is also deadly serious.

Key market gauges

S&P futures ESZ6, +0.13%  and Dow futures YMZ6, +0.08%  are heading modestly lower, as Europe SXXP, -0.67% falls and after Asia closed mostly down. The S&P SPX, -0.93%  is on track to end less than 1% in the red for the week, but it is down about 1% for the month. It’s up roughly 3% in the third quarter and about 5% higher in the year to date.

Oil CLX6, +0.00% is lower, while safety-play gold GCZ6, +0.16% is up. A key dollar index DXY, +0.32%  is rising, helped by the euro EURUSD, -0.5079%  losing ground.

The call

“Any failure of Deutsche Bank would not result in the complete freezing up of the financial system that we observed eight years ago,” argues Macro Man.

Basically, there has been a change in market structure that “makes it more difficult for a systemically-important bank to be as systemically important as Lehman was,” he suggests.

“For one thing, there is a veritable ocean of liquidity available today through various programs (LTROs, etc.) that were not in place during 2008. It is therefore difficult to see DB running out of money as swiftly as Lehman did.”

It has to do with a drop in the velocity of collateral and a financial practice known as “re-hypothecation” becoming less prevalent. (Go here for his full post with all of the gory details behind that jargon.)

“However, there is a pretty wide gulf between ‘not Lehman redux’ and ‘pony rides and lemonade for everyone,’” adds Macro Man. He suggests a Deutsche bust really could hurt — particularly given that other banks are looking ropy on their own accord.

So much for those calls to buy banks? Veteran analyst Dick Bove is still sounding bullish on the sector XLF, -1.40%  , but also getting blasted for that.

Read more: Deutsche Bank crisis roils global markets

And see: Deutsche Bank shareholders in for more pain

The chart

As the Supreme Court prepares to hear the first of two death penalty cases in this year’s term, the share of Americans backing the death penalty for people convicted of murder stands at its lowest level in more than 40 years. So says a Pew Research Center report , which offers the chart above.

The buzz

“Soon turned out — had a phone of glass…”

The latest rumor about Apple’s AAPL, -1.55%  next iPhone: It might have an almost all-glass casing.

Tech startup Nutanix NTNX, +0.00% is expected to start trading today after pricing its IPO higher than an elevated price range that it named earlier this week.

See: 4 things to know about Nutanix

Costco COST, -1.29%  reported better-than-expected profit, and LinkedIn’s stock LNKD, -0.74%  could move as Salesforce CRM, -0.59%  fights against Microsoft’s MSFT, -1.09% planned acquisition of the social network for career-ladder climbers.

In election news, USA Today’s editorial board has taken sides in a presidential race for the first time ever, arguing Donald Trump is “unfit for the presidency.” Other opinionators argue the mainstream media haven’t been all that effective since deciding the GOP candidate is a unique threat. Maybe it’s time for some reverse psychology and a bunch of endorsements?

The economy

A release on personal income and outlays is expected at 8:30 a.m. Eastern Time.

Shortly after the open, watch for readings on business conditions in the Chicago area and consumer sentiment. Then a report on North America’s oil-rig count is slated to hit in the afternoon.

After lots of Fed speeches earlier this week, there are none expected today.

Check out: MarketWatch’s Economic Calendar

The quote
Duterte compares himself with Hitler

(1:05)

Philippine President Rodrigo Duterte sparks yet another controversy.

“There are three million drug addicts [in the Philippines]. I’d be happy to slaughter them. If Germany had Hitler, the Philippines would have…” — Philippines President Rodrigo Duterte said this, then paused and pointed to himself. The backlash came quickly.

The stat

1 million — That is how many Chinese-made security cameras, DVRs and other gadgets were reportedly hijacked by hackers to launch huge internet attacks. Those targeted last week included a web hosting company and security researcher Brian Krebs.

Random reads

This former waitress says she turned $20K into a cool million in the stock market.

Stanford’s business school will give you a free MBA if you take a job in the Midwest.

Silicone wedding rings are becoming a thing in the NFL.

“Drama queen” and “emotional” among the labels that women want banned.

Why Democrats are now all Cubs fans.

A spacecraft is dying this morning:

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