LONDON (Reuters) - Big losses for Germany's biggest bank meant European markets started the week on a sour note on Monday as slightly better than expected Chinese data failed to dispel a general air of caution.
Deutsche Bank (DBKGn.DE) reported a surprise pre-tax loss of 1.15 billion euros for the fourth quarter of 2013 due to heavy costs for litigation, restructuring and balance sheet reduction.
The bank was originally scheduled to report its results on January 29, but opted to release them early after the Wall Street Journal on Friday reported that a profit warning was possible.
Its shares opened down more than 5 percent, dragging down bank stocks across the region as Germany's Dax .GDAX, down 0.3 percent, also led the region's list of losing bourses.
Liquidity was lacking with U.S. markets closed on Monday for a holiday. The Dow Jones index .DJI ended last week with a slim gain of 0.1 percent, while the S&P 500 .SPX lost 0.2 percent for the week.
In Asia, a majority of share markets in the region had stayed in the red last week, with Tokyo off 0.5 percent .N225, Sydney 0.3 percent and Shanghai 0.5 percent .SSEC, adding to a miserable few weeks.
China's annual economic growth slowed a tick to 7.7 percent last quarter, which was just ahead of market forecasts for 7.6 percent and at least countered fears that monetary tightening might have caused a sharper pullback.
"The economy may be a little more robust than people thought coming into 2014," said Tim Condon, an economist at ING Group in Singapore.
"I had thought the monetary tightening in 2013 would pose a downside risk. The numbers reduce that downside risk."
Other data out of China was much in line with forecasts, with retail sales growing 13.6 percent in December from a year earlier, while industrial output rose 9.7 percent.
That resilience was considered a positive for Australia, given that China is its single biggest export market, and helped the Australian dollar clamber off a three-year trough of $0.8756 to reach $0.8780.
Yet the Australian currency remains out of favor, having shed 2.4 percent last week due to disappointing domestic data and demand for U.S. dollars and yen.
The yen was in favor again on Monday as the general mood of risk aversion led speculators to cut back on short positions, which has been a very popular trade for months now.
The Bank of Japan holds its policy meeting on Tuesday and Wednesday and is expected to maintain its massive asset buying program.
The euro was particularly affected, dropping to a six-week low at one stage against both the dollar and the yen before steadying at $1.3545 and 141.03 yen respectively. The dollar eased to 104.11 yen from an early 104.32.
A sovereign rating upgrade for euro zone bailout poster child Ireland helped ensure the recent rally in periphery debt rumbled on in debt markets <GVD/EUR>, though Deutsche's troubles darkened the mood.
The unexpected loss is likely to compound the problems that have dogged the bank over the past year, especially a lengthening list of lawsuits and regulatory matters, and to redouble pressure on co-chief executives Anshu Jain and Juergen Fitschen to prove their turnaround plan is on track.
The EU's quarterly earnings season shifts up a gear this week. STOXX Europe 600 companies are seen missing consensus by 0.4 percent on revenues and by 0.9 percent on earnings, according to StarMine SmartEstimates, which focuses on the predictions by the most accurate analysts.
Among emerging markets, the Turkish lira touched a new record low on Monday as a corruption scandal and fading hopes for a policy reaction from the central bank to support the battered currency weighed on markets.
Societe Generale strategist Kit Juckes said markets remained nervous about the impact on under-pressure developing nations as the U.S. Fed scales back its stimulus this year, adding with reference to Turkey "trouble continues at mill".
In commodities, spot gold made an early push to a five-week peak of $1,259.46 an ounce, thanks in part to talk of strong physical demand from Asia. It was last at $1,256.60.
Data from the Commodity Futures Trading Commission also showed on Friday that hedge funds and money managers raised their bullish bets in gold and silver futures and options for a third week amid a decline in stocks.
Brent crude oil for March delivery was off 10 cents at $106.38 a barrel, while U.S. crude fell 63 cents to $93.74. Having had its best week in almost a year last week, Nickel also dropped, falling 2.4 percent to $14,340.
Addtional reporting by Wayne Cole in Sydney; Editing by Gareth Jones