Banks Lead Europe Stocks Lower on Skepticism After Stress Tests

Stoxx 600 Falls 0.5% as Banks Drag Down Equities

Lenders dragged down European equities amid investor skepticism even as stress-test results showed most of the firms would keep an adequate level of capital in a crisis.

The Stoxx Europe 600 Index slipped 0.6 percent, reversing an increase of as much as 0.6 percent. Italy’s Banca Monte dei Paschi di Siena SpA, which jumped as much as 11 percent as it said it’s working on a plan involving private investors to help bolster its finances, erased almost all its gains by the end of the day. UniCredit SpA, the second-worst performer in the exam, sank 9.4 percent. Britain’s Barclays Plc and Deutsche Bank AG slid more than 1.8 percent. Energy producers also weighed on the market amid losses in oil, with Royal Dutch Shell Plc down 3.2 percent.

“Investors are skeptical about everything these days,” said Peter Garnry, head of equity strategy at Saxo Bank A/S in Hellerup, Denmark. “The problem with the stress tests is that they were too soft, only assuming a mild to moderate recession. This means that the data doesn’t tell us much, and it’s not too surprising that most banks passed. What could drive markets higher from here is any sign that the global economy is picking up.”

While European equities had their biggest monthly gains since October in July -- with lenders jumping the most since February 2015 -- the Stoxx 600 remains down 7.1 percent for the year. July was marked by record outflows from European stock funds and thin volume, indicating a lack of conviction in the rally. The benchmark gauge is still 1.9 percent below its level on the day of the U.K. referendum on European Union membership, while U.S. and Asian equities have already recovered.

Data on Monday showed that manufacturing in the euro area slipped in July, with the U.K. referendum hitting Britain’s factory output more than initially forecast. The nation’s FTSE 100 Index lost 0.5 percent, and the FTSE 250 Index of mid-cap companies dropped 0.8 percent.

Among other stocks moving on corporate news, Air Liquide SA declined 2.4 percent after the French industrial gas company said earnings fell in the first half of the year, missing analysts’ estimates. Heineken NV lost 3.7 percent as the brewer reported sales growth that missed projections. Casino Guichard-Perrachon SA slid 5.2 percent as Oddo said its sees the supermarket chain’s 2016 French forecast at risk and lowered its rating on the stock to the equivalent of a sell.

Legrand SA gained 3.8 percent after reporting an increase in adjusted operating growth for the first half of the year. Amundi SA jumped 7.4 percent after the French asset manager reported a rise in second-quarter profit with further asst inflows. Credit Agricole SA, its majority owner, slipped 1.4 percent.

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