Trouble In U.S. Reaches Markets, ETFs of Europe, Asia | ETF Trends

Like a wave moving across the ocean, the turmoil that started in U.S. markets yesterday spread to both Europe and Asia’s exchanges and exchange traded funds (ETFs).

The fallout from the collapse of Lehman Brothers (LEH) led to panicked selling of financials in Tokyo. Many of the failed American company’s biggest creditors are based there, says Martin Fackler for the New York Times. When Lehman filed for bankruptcy, it said it had outstanding loans to seven Japanese banks that were worth $1.6 billion.

But analysts say that the Japanese banks’ losses were likely much smaller than what the filing stated.

The full impact of the crisis isn’t known in the global financial markets, especially in those areas where Lehman had been a big player. But even with the collapse, analysts say that the damange won’t be more than minor.

Stocks also slid in Europe for a second day, sending the Dow Jones Stoxx 600 Index to its lowest point in three years, reports Adria Cimino for Bloomberg. Some of the region’s largest banks took hits: UBS AG (UBS) reported more than $43 billion of subprime-related losses and writedowns, and the downgrade of American International Group’s (AIG) credit rating only further increased nervousness.

Benchmark indexes in every Western European market, except Spain, closed lower.

Affected ETFs include:

  • DJ Euro STOXX 50 (FEZ), down 28.8% year-to-date
  • iShares S&P/TOPIX 150 Index (ITF), down 19% year-to-date
  • iShares MSCI EAFE Index (EFA), down 27% year-to-date

The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.