European stock markets have opened weaker this morning, following in the wake of Asia, itself triggered by President Obama’s threat to bash the banks last night.
Commodity prices went on the slide across the board and traders started selling off risky assets after Obama announced he was thinking about new restrictions on the banking sector in the USA.
Tokyo followed Wall street’s lead, where prices fell two percent overnight, by closing at a three-week low, over two and a half percent down.
Korea and Hong Kong also fell by similar amounts, the worst one-day losses recorded by the markets since October.
Obama has suggested preventing banks or financial institutions from investing in, owning, or sponsoring hedge and private equity funds. “If these folks want a fight, it’s a fight I’m ready to have. And my resolve is only strengthened when I see a return to old practices at some of the very firms fighting reform,” he said.
Investors say the proposals could limit leverage and the role of risk-taking by the hedge funds, and could diminish capital flows from banks, cutting liquidity for investors, but added they could face a tough congressional battle to become law.
Obama bank threats echo around the world