A plunge in banks put a halt to the optimism that lifted European equities last week, sending them to their biggest slumps since early July.
Growing worries over Deutsche Bank AG’s capital buffers dragged the stock to a fresh all-time low and cast a pall on its peers. A gauge tracking the firms trades at 0.66 times book value, less than any other industry group in the region and near a record low relative to the Stoxx Europe 600 Index.
The benchmark measure lost 1.6 percent, erasing about two-thirds of the gains it posted last week, while banks traded at their lowest prices in more than a month. A measure of volatility for euro-area shares jumped the most since January after closing at the lowest level since 2014.
“The drama around Deutsche Bank puts the European financial sector in the spotlight once again,” said Michael Woischneck, who manages about $180 million as senior equities manager at Lampe Asset Management in Dusseldorf, Germany. “It makes you wonder what the situation is like at other banks with significant capital-markets activities. We’re also entering a quarter with a lot of political event risks, and I’d expect big swings in volatility.”
Deutsche Bank slumped 7.5 percent, following a report that German Chancellor Angela Merkel has ruled out any state assistance before the national election next year. The lender has been in focus this month, after the U.S. sought $14 billion to settle claims related to the sale of mortgage-backed securities.
Italy’s UniCredit SpA, Bank of Ireland and BNP Paribas SA were among other financial firms that lost at least 3 percent. Benchmark equity gauges of Germany, France and Italy declined more than 1.5 percent, while Britain’s FTSE 100 Index fell 1.3 percent.
Last week’s bullishness, triggered by confidence that central banks will continue to spur growth, is quickly fading amid growing worries about Europe’s recovery and the state of its lenders. Economic data for the euro area are back to missing forecasts, and investors pulled money from the region’s equity funds for a record 33 straight weeks, a Bank of America Corp. report showed on Friday. The Stoxx 600 has lost more than 7 percent this year, dragged down by lenders, while equity gauges in the U.S. and Asia have climbed.
Among other stocks moving on corporate news, Tesco Plc declined 2.8 percent on a report that the U.K. grocer’s pension deficit has doubled in the past year. IAG SA, the British Airways parent that reported a deficit of $905 million in the first half of the year, lost 2.8 percent. Dialog Semiconductor Plc, the chipmaker whose biggest client is Apple Inc., slid 3 percent. Apple shares slipped late Friday on speculation that iPhone 7 sales could be disappointing.
Only 35 companies in the Stoxx 600 rose. Lanxess AG rallied 8.1 percent after the German chemical maker agreed to buy U.S. rival Chemtura Corp. for about $2.1 billion in cash.
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Credit: Bloomberg Business