- Credit market fears spilling into equities: Deutsche Bank
- European lender gauge slides on concern about bank debt
European stocks tumbled for a seventh day and a gauge of banks slid to its lowest level since 2012 as the global equity rout showed no signs of abating.
Greece’s Eurobank Ergasias SA led lenders lower, sliding 12 percent, as the cost of insuring financial debt rose amid concern over whether banks are strong enough to cope with a downturn. Credit Suisse Group AG lost 8.4 percent after the Swiss National Bank said it could reduce its negative deposit rate further. Deutsche Bank AG reversed gains, falling 4.3 percent to its lowest price since at least 1992 even as it reassured investors that it has enough cash to pay its debts.
The Stoxx Europe 600 Index dropped 1.6 percent to 309.39 at the close of trading, its lowest level since October 2013, sending it into so-called “oversold” territory. The volume of shares changing hands was 52 percent higher than the 30-day average. A gauge tracking stock swings rose to its highest in three weeks and has jumped 53 percent this year. Greece’s ASE Index slid to its lowest since at least 1989.
“Volatility is getting very high,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. “Investors need to increase their cash and be careful in case they see any buying opportunities. A technical rally may easily get sold again, we won’t come back to calm waters soon.”
Global equities have been battered in volatile trading amid investor concern over oil prices, earnings and the strength of the U.S. and Chinese economies, with the MSCI’s All-Country World Index approaching a bear market. The Stoxx 600 now trades at 13.6 times estimated earnings, about 22 percent below its April 2015 peak.
European lenders are being pummeled as concern about credit markets seeps into equities, with Deutsche Bank strategists saying a further 200 basis points widening in credit spreads would point to 8 percent downside for stocks, with banks suffering the most.
Still, Jonathan Golub of RBC Capital Markets said the bank rout has gone too far, and lenders present an opportunity to buy. Separately, Goldman Sachs Group Inc. said it remains confident that European banks have “ample liquidity,” with deposits flowing in and higher capital buffers, reducing the risk of repeating the financial crisis.
Commerzbank AG fell 4.4 percent to its lowest price since July 2013. Swedbank AB slid 5.7 percent as Sweden’s biggest mortgage bank ousted its chief executive officer. Svenska Handelsbanken AB added 1.6 percent after reporting a 35 percent jump in fourth-quarter profit.
A gauge of commodity producers posted the worst performance on the Stoxx 600 as Goldman Sachs said the recent rally was unjustified. ArcelorMittal slumped 11 percent after brokers including JPMorgan Chase & Co. and ING Groep NV cut their ratings on the steelmaker to the equivalent of hold. Anglo American Plc also retreated 11 percent.
Among stocks moving on corporate news, Vestas Wind Systems A/S jumped 7.5 percent after it forecast record sales in 2016 and boosted its dividend.
Gamesa Corp. Tecnologica SA advanced 5.6 percent after people familiar with the matter said that Siemens AG is close to a deal to combine its wind business with the Spanish company’s operations.