U.S. stock index futures pointed to a lower open for Wall Street on Monday after a surge in the previous session, as global banks said they faced potential losses from a hedge fund’s default on margin calls.
Nomura (8604.T) and Credit Suisse (CSGN.S) warned of losses after the U.S. hedge fund, named by sources as Archegos Capital, defaulted, hitting shares in some big U.S. media and Chinese tech companies. read more
Shares in Morgan Stanley (MS.N) tumbled about 5% after the Financial Times reported it had also sold billions of shares, while Bank of America Corp (BAC.N), Citigroup Inc (C.N), JPMorgan Chase & Co (JPM.N), Goldman Sachs (GS.N) and Wells Fargo & Co (WFC.N) dropped between 1.6% and 2.5%.
The news has raised concerns about whether the full extent of Archegos’ apparent wipeout has been realized or whether there was more selling to come from other lenders.
Nomura still has positions to unwind, Bloomberg reported, citing a Japan government official.
Shares in Discovery Inc (DISCA.O), U.S.-listed shares of Tencent Music (TME.N) , ViacomCBS (VIAC.O), Baidu and VIPShop (VIPS.N), all linked to Archegos Capital, gave up early gains to shed 0.6% and 5.8%. Theses stocks lost between 30% and 50% of their values last week.
“It’s a black eye for the financial industry because it suggests that there still may not be a full handle on risk control when it comes to leveraged trading,” said Rick Meckler, partner at Cherry Lane Investments, a family investment office in New Vernon, New Jersey.