Banks Send Europe Stocks to Worst Week Since Brexit Vote Run-Up

Europe Stocks Close Out the Week With a Loss
  • Banks drag Italy’s FTSE MIB to biggest drop in western Europe
  • Glencore leads miners lower as commodity prices retreat

European stocks posted their biggest weekly slide since the run-up to the Brexit referendum on speculation the recent rebound might have been overdone.

In a broad-based selloff, the Stoxx Europe 600 Index resumed declines after a brief respite on Thursday. Concern over the health of Italian lenders and an upcoming referendum in the country that may lead to the resignation of its prime minister dragged the FTSE MIB down the most among western-European markets. A gauge of miners fell the most in a month as commodities sank amid a rebound in the dollar.

Investors are questioning the recovery that lifted the Stoxx 600 as much as 12 percent since the U.K. vote to leave the European Union. Skepticism about the ability of central-bank stimulus to boost growth amid political turmoil has triggered record outflows from the region’s equity funds, with a Bank of America Corp. report today showing that managers withdrew money for a 28th straight week.

“I think it’s the case that we’ve run up pretty hard in the past six weeks or so and that slightly caught investors unawares,” said James Buckley, a portfolio manager at Baring Investment Services Ltd. “That’s probably going to mean that to push on further from here we would need some further affirmative data. I wouldn’t be surprised to see a pause around these levels, perhaps with a downward drift.”

The Stoxx 600 retreated 0.8 percent to 340.14 at the close of trading, with almost all of its industries down. The gauge, which has failed to break through its 200-day moving average in recent days, lost 1.7 percent this week. The volume of shares changing hands on Friday was 18 percent below than the 30-day average.

Italy’s FTSE MIB Index lost 2.2 percent, while Spain’s IBEX 35 Index, the third-biggest decliner for the region, slid 1.2 percent. Prime Minister Mariano Rajoy agreed to face a confidence vote in parliament at the end of this month.

Concern that the European Central Bank stimulus program is hurting profitability at lenders has weighed on their shares all year. An index tracking them has tumbled 27 percent in 2016, with companies including Deutsche Bank AG, Credit Suisse Group AG and Italy’s Banca Monte dei Paschi di Siena SpA reaching record lows. On Friday, UniCredit SpA and Banca Popolare dell’Emilia Romagna SC tumbled more than 5.5 percent. Monte Paschi fell 2.6 percent as a person familiar with the matter said its chief executive officer and former chairman are under investigation for false accounting.

Among other stocks moving on corporate news:

  • Royal Vopak NV slid 7.1 percent, the most in a year, after the storage-tank operator reported lower revenue and cashflow. 
  • A.P. Moeller-Maersk A/S rose 1.9 percent after saying it’s still considering several options in its strategic review after a local newspaper reported that the Danish conglomerate was exploring a two-way split into an energy and a transport company.
  • William Hill Plc climbed 3.9 percent after the U.K.’s biggest bookmaker said that operating profit for 2016 would be at the higher end of its forecast.

(An earlier version of this story was corrected to fix the Stoxx Europe 600 Index’s weekly performance.)

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