Banks Drag on Euro Stocks, Autos Rally
European shares ended with losses on Tuesday as the region's financial stocks suffered following further writedowns from the third-largest U.S. bank JPMorgan.
The FTSEurofirst 300 index of top European shares provisionally closed 0.3 percent lower at 1,208.89, having traded between 1,202.55 and 1,216.40 points.
JPMorgan traded 6.9 percent lower on Wall Street after it said it had taken another $1.5 billion in writedowns in the current quarter as wider credit spreads, lower levels of liquidity and further disruption in the credit and mortgage markets took their toll.
The DJ Stoxx European banks index fell 1.1 percent, with BNP Paribas, Deustche Postbank and Societe Generale all down more than 3 percent. Natixis lost 9.7 percent.
"The market is doubting whether the U.S. rate cuts are having an effect," said strategist Andreas Huerkamp at Commerzbank in Frankfurt.
"The U.S. had a steep yield curve since January, which usually has a positive effect on the equity markets, but now seven months have passed and we are still experiencing negative news in the financial sector," he added.
Swiss bank UBS ended 2.4 percent lower after a rollercoaster session -- its shares rose as much as 4.2 percent and fell as much as 2.9 percent -- after it said it would split its business into three units and named a new CFO after disappointing quarterly results.
However, analysts praised its improved Tier 1 capital ratio as well as its focus on reducing its exposure to risky asset classes.
Merrill Lynch reiterated its "buy" stance on the stock and said it hoped the new strategy would "help insulate the private banking franchise from the problems elsewhere in the bank."
Among insurers, Standard Chartered lost 6.8 percent after Citigroup downgraded the stock to "sell" from "hold," noting that the continued dominance of wholesale versus consumer banking profits was expected to weigh on group returns.
Reinsurer Munich Re lost 0.8 percent on the back of a report in Focus Money magazine that said the group could face 2.7 billion euros in writedowns in the second half unless capital markets changed.
Automotive stocks were among the strongest plays on Tuesday as the euro hit a six-month low against the dollar earlier in the session, though the dollar's rise later stalled.
The DJ Stoxx index of European auto stocks was up 1.7 percent, with BMW 1.5 percent higher, Daimler up 1.4 percent and Fiat up 1.6 percent.
Other notable gainers included biotechnology group Addex, which soared 9.3 percent on the back of bid talk from a Swiss rival.
Commercial broadcaster ITV rose 6.3 percent, extending a similar gain in the previous session, as speculation lingered that peer Endemol had cast an acquisitive eye on its British peer.
Celesio soared 11.1 percent despite a profit warning as investors hoped for a smooth recovery at Europe's biggest drug distributor, with analysts pointing to the stock's recent underperformance.