Europe open: Stocks in the red as Deutsche Bank tumbles

European stocks fell in early trade, with bank issues pacing the decline as worries about Deutsche Bank intensified.

At 0850 BST, the benchmark Stoxx Europe 600 index was down 1.6%, France’s CAC 40 was 2.1% weaker and Germany’s DAX was 2% lower.

Meanwhile, the Stoxx 600 banks index was 3.3% lower as Deutsche Bank tumbled 8% following reports that a number of key funds had withdrawn money from the German lender, which currently faces a $14bn fine from the US Department of Justice for mis-selling mortgage-backed securities.

Spreadex’s Connor Campbell said: “After a couple of days of relief the markets are back in the red, with Deutsche Bank continuing to position itself as the number one worry for investors.

“A Bloomberg report yesterday evening claiming that 10 hedge funds had reduced their exposure to the German financial firm has sparked the latest round of heavy losses, with Deutsche Bank dropping between 9% after the bell. That drop has seen the bank dip below €10, effectively its worst price in 30 years. Understandably the European markets are rattled.”

Goldman Sachs said it believes Deutsche’s liquidity position for the second quarter of 2016 is stable and further strengthened by funding backstops from the European Central Bank, which remain available to all eurozone banks.

"This said, the reaction of (admittedly less liquid) the ADR to a single piece of news flow demonstrates the extent of concern in the market. As we highlighted previously, as market concerns intensify, achieving resolution to litigation, and thus capital concerns, is important.”

News from Commerzbank on Thursday did little to help matters, after it said it was planning on axing thousands of jobs as it looks to cut costs. It also announced the suspension of its dividend.

Meanwhile in the UK, Royal Bank of Scotland was under the cosh as it announced a restructuring of its operations to ring-fence retail operations from riskier parts of the business.

Away from banks, Telefonica was in the red after it cancelled the planned listing of its Telxius business on the back of weak investor demand.

Insurers AXA and Allianz were in focus following a report that they had advanced to the next stage of talks over a deal with Standard Chartered that would allow them to sell their products through the bank's Asian branches.

Oil prices retreated on Friday amid doubts about the OPEC deal agreed on Wednesday and as investors booked some profits. West Texas Intermediate was down 1.4% at $47.18 a barrel and Brent crude was off 1.5% at $48.51.

On the macroeconomic front, eurozone inflation and unemployment figures are due at 1000 BST.