Europe Markets

Europe ends sharply lower as banks tumble 3.4%; growth concerns weigh

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Growth is best way to solve NPL problem: Italy PM
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Citi: BoE must be reactive post-Brexit
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European markets finished deep into negative territory on Tuesday, as concerns over the health of the region's lenders continued to weigh on sentiment.

The pan-European STOXX 600 ended 1.29 percent down provisionally, with all sectors posting solid losses.

European markets

The U.K.'s FTSE 100 ended 0.73 percent down, with losses capped as sterling climbed 1 percent against the U.S. dollar at Europe's close.

Meanwhile, the French CAC 40 and German DAX fell further, off around 1.8 percent each. In peripheral markets, the main bourses in Spain, Italy and Greece all under-performed, off more than 2.5 percent each.

Banks sink 3.4%: Commerzbank, BMPS, Unicredit tank

The banking sector was once again front and center for investors just days after the conclusion of the European-wide stress tests. Italian Prime Minister Matteo Renzi told CNBC on Monday that Rome has resolved the country's banking problem once and that investors should focus on weak spots elsewhere in Europe.

"Personally, I (am) really concerned for the future of European institution(s)—not for Italian non-performing loans (NPLs) but for the situation of other banks," he said in an interview.

Barclays, BBVA, Commerzbank, HSBC and Societe Generale have joined a consortium of banks to pre-underwrite the capital increase for Banca Monte dei Paschi di Siena, one of Italy's most troubled lenders, according to Il Sole 24 Ore. Shares of BMPS were briefly suspended from trade, but finished at the bottom of Europe's benchmarks, off 16.1 percent.

Unrealistic to think 2016 results could top 2015’s: Commerzbank
Unrealistic to think 2016 results could top 2015’s: Commerzbank

And Unicredit tanked 7.15 percent and was briefly suspended from trade over concerns about its bad loan portfolio with investors worried it would need a larger-than-expected capital raise.

On the earnings front, Germany's Commerzbank cut its full-year net profit target for 2016, due to caution from customers and the continued low-interest rate environment, sending shares to close 9.2 percent down.

Swiss bank UBS ended 6 percent down after Sonntagszeitung cited analyst estimates that UBS and Credit Suisse could face 2 billion Swiss francs each in fines from U.S. regulators due to the mis-selling of mortgage-backed securities, according to Reuters. Credit Suisse will also be removed from the STOXX Europe 50 index from August 8, sending shares in the lender near the bottom of Europe's benchmarks.

Earnings in focus: Direct Line soars 12.6%

A number of other European companies also kept investors on their toes as they reported earnings on Tuesday. In the auto space, BMW reiterated its guidance for 2016 after reporting a rise in core profit, helped by sales of luxury cars. Despite this, shares ended over 2 percent down.

Autos in general under-performed most sectors, closing 2.7 percent down, with Volkswagen, Fiat and Porsche all off more than 4 percent each.

Meanwhile, German airline Lufthansa reported a nearly 12 percent year-on-year rise in earnings before interest and taxes (EBIT) for the first half of the year. The company warned, however, that the second-half of the year would be tougher with full-year adjusted EBIT for 2016 likely to come in below last year's level. Lufthansa said it will continue with cost-cutting measures. Shares slipped 3.2 percent.

InterContinental Hotels Group popped 3 percent after it reported a rise in first-half operating profit and said that it was confident in the outlook for the rest of the year. Direct Line was the STOXX 600's best performer, up 12.6 percent after it delivered half-yearly profits that beat forecasts.

Impact of Brexit has pushed investors up the risk curve: Strategist
Impact of Brexit has pushed investors up the risk curve: Strategist

Shares in German chipmaker Infineon tumbled just shy of 5 percent after reporting a rise in operating profit in the three months to the end of June that missed analysts' expectations.

Elsewhere in Germany, retailer Metro posted a surprise loss before interest and tax in the third quarter due to restructuring costs, sending shares tumbling 8.7 percent.

Other major earnings include Dutch firm DSM which raised its full-year outlook after an 18 percent rise in second-quarter core earnings. Shares rallied 3.5 percent.

US Crude slips below $40

On Tuesday, oil prices showed signs of recovery during the session as traders tried to shake off concerns of an oversupply in the market, however glut concerns resurfaced by Europe's close, causing prices to slip once again. Brent and U.S. WTI were in the red at 16.30 p.m. London time, trading at $41.99 and $39.86 respectively.

Meanwhile, the oil and gas sector was in the red, with Saipem down 2.6 percent after UBS cut its price target for the stock. The basic resource sector was also lower amid concern over global growth and demand for metals, however Randgold Resources ended in the black, as spot gold prices ticked higher.

Elsewhere in the world, markets in Asia finished mostly lower on Tuesday, with Australian shares falling despite the Reserve Bank of Australia's cutting its cash rate by 25 basis points to 1.50 percent, a record low. The weak performance in both Asia and Europe markets triggered a weaker trading session in the U.S.

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