Market wrap: markets spooked on Deutsche Bank - Westpac

Analysts at Westpac offered a market wrap.

Key Quotes:

"Global market sentiment: An initial OPEC-driven jump in risk appetite gave way to risk aversion overnight, markets spooked by concerns about the health of Deutsche Bank. Bloomberg reported that some funds that clear derivatives trades with Deutsche Bank have withdrawn some excess cash and positions held at the bank. The report raised anxiety over the health of the German lender, its shares having already taken a big beating this week and deepening this year's rout to -57% year to date. The company’s US traded stock fell more than 7%, dragging financials lower across the board and pulling the major US equity indices about 1% lower at one stage before they settled. A late bounce trimmed S&P 500 losses to 0.5%. US 10yr bond yields fell about 5bp to 1.55% on safe haven demand while AUD and NZD both shed ground. Oil added to yesterday’s gains fuelled by OPEC’s decision to trim output, WTI rising another 1.3%.

Interest rates:  US fixed income yields were higher in early offshore dealings, hit by a barrage of hawkish Fed commentary from the Fed’s George, Mester and Harker, all arguing for a Fed hike sooner rather than later. But, the Deutsch Bank fuelled spike in risk aversion saw US fixed income yields tumble the 10yr slipping about 5bp to 1.5599% in afternoon US trading.

Currencies:  Risk aversion pushed the USD higher across the board, ex JPY and CHF. AUD was rebuffed from 0.77 yet again and fell about US1/2 cent to 0.7650. NZD briefly tested USD0.73+ in early offshore trade but the Deutsche Bank news sent it down about US1/2 cent to lows around USD0.7237 before it stabilised nearer 0.7260. EUR/SUD was testing higher levels in early offshore trade near 1.1250 but it fell to 1.1215. USD/JPY fell from highs near 101.80 to around 101.00 before stabilising."