Asian and European markets tumbled yesterday, tracking a sell-off in New York as worries about the future of German banking giant Deutsche Bank hammered financial stocks.
A Bloomberg report that several hedge funds had withdrawn their investments in the lender over worries about its viability after US authorities slapped it with a $14bn penalty over its sale of mortgage-backed securities prior to the 2008 financial crisis.
There are fears the fine could batter the already fragile firm, fuelling talk that it would become another Lehman Brothers, the Wall Street titan whose downfall precipitated the global downturn six years ago.
AFP sources knowledgeable of the situation confirmed 10 funds had pulled funds out, but the bank said the report gave an overly negative view of the situation, noting it still had some 800 funds as customers who understand its “stable financial position”.
Deutsche Bank collapsed almost 9% yesterday in Frankfurt — falling below €10 for the first time — after plunging almost 7% in New York.
The losses were reflected in Asia, with Japan’s Mitsubishi UFJ Financial Group diving more than 2% and HSBC down 1.7% in Hong Kong.
Sydney-listed Commonwealth Bank sank 1.5% and Westpac lost 1.4%.
“Deutsche certainly weighs on sentiment, and the declines are concerning,” James Woods, a strategist at Rivkin Securities in Sydney, told Bloomberg News.
“Being named the number one bank for global systemic risk, it’s entwined with everyone.”
The sell-off dragged broader markets down, a day after an oil-fuelled rally following Opec’s surprise announcement that it would cut production.
Tokyo ended down 1.5%, while Hong Kong was 1.9% off, Sydney fell 0.7% and Seoul lost 1.2%.
Singapore tumbled more than 1% and there where sharp losses in Taipei and Manila.
However, Shanghai rose 0.2% ahead of a week-long national holiday.
In early European trade Frankfurt tumbled 1.8%, London sank 1.4%, Paris lost more than 2%.
The losses followed falls on Wall Street, where traders ran for cover as they brushed off data showing US second-quarter economic growth figures beat forecasts.
The unease spread into currency markets, with high-yielding — riskier — units fell against the dollar as dealers looked for safety.
South Korea’s won fell 0.2%, the Indonesian rupiah lost 0.3% and the Australian dollar slipped 0.6%.
The greenback, however, sank to ¥100.91 from ¥101.04 in New York and well off the levels above ¥101.50 seen earlier on Thursday in Asia.
On oil markets both main contracts fell as the euphoria over Wednesday’s shock agreement by Opec to reduce production faded.
West Texas Intermediate fell 0.9% and Brent was off more than 1%.
In Tokyo, the Nikkei 225 down 1.5% at 16,449.84 points; Hong Kong — Hang Seng down 1.9% at 23,297.15 points and Shanghai — Composite up 0.2% at 3,004.70 points at the close yesterday.