* Deutsche Bank closes up 6.4 pct
* STOXX 600 ends up 0.1 pct, DAX up 1 pct
* Deutsche Bank shares down nearly 50 pct in 2016
* STOXX 600 down 6 pct in 2016
By Sudip Kar-Gupta
LONDON, Sept 30 European shares closed higher on
Friday, lifted by a late surge in Deutsche Bank after
a media report that it was close to settling with U.S.
authorities over alleged misselling of mortgage-backed
The pan-European STOXX 600 index ended 0.1 percent
higher, as Deutsche Bank closed up 6.4 percent, rallying towards
the end of the European trading session having initially sunk to
record lows of below 10 euros at the start of the day.
Traders cited a report by Agence France Presse that Deutsche
Bank was near a $5.4 billion settlement with U.S authorities
over the mortgage-backed securities affair as contributing to
the spike in the company's shares. That would be considerably
less than the $14 billion demanded by the U.S. Department of
Deutsche Bank declined to comment on the media report. In
spite of Friday's recovery, Deutsche Bank shares remain near
record lows and are down nearly 50 percent so far in 2016.
Earlier, U.S. investment bank JP Morgan also estimated the
U.S. fine could be reduced to $5.4 billion. But it said Deutsche
would not have enough current reserves to pay a fine that was
more than $4 billion and would have to raise more capital if so.
Morgan Stanley estimated Deutsche Bank could reach a $6
billion settlement over the affair, and could agree on a deal
before November's U.S. presidential election.
Several traders expressed relief at signs that Deutsche Bank
could be near a deal with U.S. authorities.
Clairinvest fund manager Ion-Marc Valahu added he did not
have concerns over Deutsche Bank's financial position, given how
Deutsche Bank and other euro zone lenders have access to the
European Central Bank's 'LTRO' liquidity programmes.
"They are well capitalized. They have access to the LTROs,
so I'm not concerned about their liquidity, and you should not
underestimate politicians' ability to strike a deal," said
Valahu, who has a "long" position betting on further gains in
the STOXX Europe 600 Bank index.
The Deutsche Bank rally enabled Germany's benchmark DAX
index to end 1 percent higher, with the DAX also
boosted by gains at chipmakers Infineon and Dialog
Semiconductor, which were lifted by merger speculation
within the sector.
However, Spanish telecoms group Telefonica fell 4
percent as the company cancelled the stock market listing of its
German bank Commerzbank also dipped 1.2 percent on
uncertainty over whether it could deliver on restructuring
plans, which will see it axe thousands of jobs in a bid to boost
Alessandro Balsotti, portfolio manager at JCI Capital in
Milan, said the health of European banks - with Italian banks
hit by concerns over bad debts - remained a cause for concern.
"The systemic risk of European banks continues to be the
most important risk for all markets," he said.
The STOXX 600 index remains down by around 6 percent so far
(Additional reporting by Danilo Masoni; Editing by Janet