Asian, European markets sink on Deutsche Bank woes

Pedestrians walk in front of an electronics stock display in the window of a securities company in Tokyo yesterday.

AFP - 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A Bloomberg report that several hedge funds had withdrawn their investments in the lender over worries about its viability after US authorities slapped it with a $14 billion penalty over its sale of mortgage-backed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 nine percent Friday in Frankfurt -- falling below 10 euros for the first time -- after plunging almost seven percent in New York. The losses were reflected in Asia, with Japan’s Mitsubishi UFJ Financial Group diving more than two percent and HSBC down 1.7 percent in Hong Kong. 

Sydney-listed Commonwealth Bank sank 1.5 percent and Westpac lost 1.4 percent.

“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.