Deutsch Bank disappoints overnight

Deutsche Bank headquarters in Frankfurt, Germany. Shares of Deutsche Bank AG fell sharply overnight. Photo / AP

Shares of Deutsche Bank sank overnight, taking other regional bank shares lower too, after the company posted an unexpected loss, raising concern that more skeletons might be lurking in the European corporate earnings closet.

Shares of Deutsche Bank dropped 4.3 per cent after the German lender also flagged that this year will provide "further challenges".

"2013 was the second successive year in which we have invested in the bank's future growth and in further strengthening our controls while addressing legacy issues. These factors impacted our financial results," Deutsche Bank Co-Chief Executive Officer Jürgen Fitschen said in a statement.

"We expect 2014 to be a year of further challenges and disciplined implementation; however, we are confident of reaching our 2015 targets and delivering on our strategic vision for Deutsche Bank," according to Fitschen.

Other bank shares in Europe also declined, with Commerzbank sliding 4.5 per cent, Banco Popolare dropping 3.1 per cent and Credit Suisse falling 2.5 per cent.

"The banking sector is reacting to Deutsche Bank," UBS analysts including Daniele Brupbacher wrote in a report to clients, according to Bloomberg News. "Some pullback and profit taking in the sector is to be expected."

Overall, expectations are low for Europe's corporate earnings this season.

Stoxx Europe 600 companies are expected to fall short of consensus estimates by 0.4 per cent on revenues and by 0.9 per cent on earnings, according to StarMine SmartEstimates, which focuses on the predictions by the most accurate analysts, Reuters reported.

Germany's DAX fell 0.3 per cent. Europe's Stoxx 600 Index ended the day 0.1 per cent down on the previous close, as did France's CAC 40. The UK's FTSE 100 rose 0.1 per cent.

US markets were closed on Monday for the Martin Luther King holiday.

A report yesterday showed China's economic growth eased in the final three months of 2013. The country's gross domestic product climbed 7.7 per cent in the fourth quarter from a year earlier, slowing from 7.8 per cent in the third quarter. Industrial production gained 9.7 per cent in December from a year earlier, less than the 10 per cent increase in November.

Opinions were mixed on the Chinese data.

"Growth momentum is clearly weakening," Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong, told Bloomberg News. "The slowdown became increasingly clear as the quarter progressed." Expansion will decelerate this year, he added.

But it wasn't all bad news.

"The economy may be a little more robust than people thought coming into 2014," Tim Condon, an economist at ING Group in Singapore, told Reuters. "I had thought the monetary tightening in 2013 would pose a downside risk. The numbers reduce that downside risk."

Investors will eye the International Monetary Fund's latest outlook for the global economy, scheduled to be released on Tuesday. Further clues will come from the World Economic Forum which begins on Wednesday in Davos, Switzerland.

On Tuesday the Bank of Japan will start its two-day policy meeting.