European Stock Plunge Deepens in Volatile Trading as Banks Slump

  • Stoxx 600 Banks Index closes at lowest level since 2012
  • Greek, Italian and Portuguese equities are suffering the most

European Equities Fall for a Third-Straight Day

A decline in bank shares dragged European stocks down for a third day, with the Stoxx Europe 600 Index extending a one-year low.

The benchmark equity measure dropped 0.4 percent, closing at its lowest level since December 2014. The Stoxx 600 climbed as much as 1.2 percent after the market opened and later fell 0.8 percent. Lenders completed their biggest three-day drop since August, tumbling 7.5 percent in the period.

A third week of declines left the Stoxx 600 more than 20 percent below its April record, meeting the common definition of a bear market. On Monday, trading in its shares was about 18 percent greater than the 30-day average.

“We see this as a buying opportunity for the mid or long term,” said Guillermo Hernandez Sampere, head of trading at MPPM EK in Eppstein, Germany. His firm manages about 250 million euros ($272 million). “Still, volatility indexes are on levels which are far away from calm waters. We are still in risk off mode, so don’t expect a V-shaped correction to the upside.”

Worries over global growth and an oil rout took over sentiment, sending European equities back to where they were before the region’s central bank announced it would start its quantitative-easing program. In 2016 alone, the Stoxx 600 has lost 10 percent. The VStoxx Index, a measure tracking volatility in euro-area shares, reached its highest level since September last week.

The declines took the Stoxx 600’s valuation below 14 times estimated earnings for the first time since last January, while the multiple for the Standard & Poor’s 500 Index fell to 15.3. Futures on the gauge slipped 0.1 percent on Monday, with U.S. markets closed for a holiday.

Italian lenders Banca Monte dei Paschi di Siena SpA and Banca Popolare dell’Emilia Romagna SC sank more than 8.5 percent on concerns over the levels of their bad debt. Greece’s Alpha Bank SA tanked 9.2 percent.

Italy’s FTSE MIB Index, Portugal’s PSI 20 Index and Greece’s ASE Index all fell more than 2.5 percent, while benchmark equity gauges of France and Germany dropped less than 0.5 percent.

After banks, Casino Guichard-Perrachon SA was among the biggest losers in the Stoxx 600. Its shares retreated 8.4 percent after Standard & Poor’s said it’s considering cutting the French grocer’s debt rating to junk.

Among other companies moved on corporate news, Adidas AG jumped 6.3 percent after appointing Henkel AG & Co.’s Kasper Rorsted as chief executive officer to succeed Herbert Hainer. Henkel fell 4.1 percent.

Ericsson AB advanced 2.9 percent after Nordea Bank AB raised its rating to buy.

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