Global stocks hit the rocks after Asian markets slump

February 9, 2016 09:17 AM

Deutsche Bank turned negative and was down 1.2%, extending Monday's 9.5% slide. Late Monday, the German bank said it has "sufficient" reserves to make payments due this year on AT1 securities, after concern had mounted about its ability to maintain bond payments.

Strategists at Goldman Sachs said banks had enough liquidity and that recent capital hikes should reduce the risk of a financial crisis re-run.

Asian shares also slid on Tuesday. Japanese Finance Minister Taro Aso warned the yen's rise was "rough," something of an understatement as the Nikkei  nosedived 5.4%.

MSCI's broadest index of Asia-Pacific shares outside Japan fell 1.2%. Australian shares hit a 2-1/2-year closing low and would have been lower if not for holidays in many centers.

Traders said that the recent market turmoil raised the stakes for U.S. Federal Reserve Chair Janet Yellen when she gives her semi-annual testimony before Congress this week.

"She needs to come across as optimistic without being too hawkish and cautious without being negative," said Jo Masters, a senior economist at ANZ. "Hawkishness or dovishness could easily exacerbate the current sell-off, tightening financial conditions further."

U.S. crude oil fell back below $30 a barrel, having risen over 2% in earlier trade.

With copper down, gold benefited from the risk-off sentiment and reached a seven-month high.

Murmurs of recession 

The Bank of Japan's recent shift to negative rates has raised concern that exotic monetary policy is reaching the point of diminishing returns. But talk about a possible recession in the United States has also led to speculation the Federal Reserve will have to slow or suspend plans to normalize rates.

Page 2 of 3
About the Author