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US: Deutsche Bank worries hit stocks
[NEW YORK] US stocks tumbled on Thursday after a report on withdrawals from Deutsche Bank revived worries about the health of one of the world's largest banks.
News of the withdrawals sent a shudder through Wall Street, where trade had been muted earlier in the session after European and Asian markets mostly rose and US second-quarter economic growth figures bested expectations.
US-traded shares of Deutsche Bank sank 6.7 per cent following a Bloomberg report that about 10 hedge funds withdrew some funds from the German bank due to worries about its financial stability.
Bloomberg said the "vast majority" of the bank's clients have made no changes to their exposure and Deutsche Bank itself said most of its clients understand its "stable financial position." But the S&P 500 finished down 0.9 per cent at 2,151.13.
"The biggest story in the financial markets today is Deutsche Bank and the growing fear that they will become the next Lehman Brothers," said BK Asset Management analyst Kathy Lien.
The Bloomberg report comes as the US Department of Justice presses the German bank for a US$14 billion penalty over its sale of mortgage-backed securities prior to the 2008 financial crisis.
Such a payout, analysts fear, could undermine the bank's capital foundations, already weakened in the European crisis.
"The bottom line is that Europe's banking crisis has returned and it poses a major risk not only to US equities but also currencies," said Ms Lien.
Prior to the Deutsche Bank news, markets had fixated on a deal struck Wednesday by major oil producers to limit output.
Following a meeting that included Russia, the Organisation of the Petroleum Exporting Countries said it planned to trim total production by some 750,000 barrels per day.
Analysts noted that key details remain to be agreed, yet the agreement was enough to boost the share prices of oil producers such as Royal Dutch Shell, Eni and ConocoPhillips.
London's benchmark FTSE 100 jumped just over 1.0 per cent overall.
In the eurozone, the Paris CAC 40 was 0.3 per cent higher, but Frankfurt's DAX 30 reversed earlier gains, to close down by 0.3 per cent.
The Nikkei in Japan rose 1.4 per cent with the oil-linked Japan Petroleum Exploration and Inpex notching large gains.