Italy Banks Drag Europe Stocks Down for First Time in Five Days

  • U.S. market closed for holiday, S&P 500 futures little changed
  • U.K.’s FTSE 100 Index came close to entering bull market

Finding Relief for Italian Banks

The rally that lifted Europe’s stocks by the most since February lost steam as declines in Italian banks outweighed a jump in commodity producers.

The Stoxx Europe 600 Index lost 0.7 percent at the close of trading in London, with the volume of shares changing hands about 30 percent lower than the 30-day average as the U.S. market was closed for the Independence Day holiday. Banca Monte dei Paschi di Siena SpA sank 14 percent, leading the industry lower, while miners of precious metals Fresnillo Plc and Randgold Resources Ltd. climbed at least 4.3 percent with silver and gold set for their highest prices since 2014.

Equities halted a rebound after jumping 7.6 percent in four days, recovering more than half their losses from the aftermath of the British vote to leave the European Union. After the referendum, both the European Central Bank and Bank of England have pledged to help make liquidity available, and traders pushed back bets for further Federal Reserve rate increases. Chancellor of the Exchequer George Osborne set a goal of lowering the corporate tax rate to 15 percent in an effort to keep businesses investing in the U.K.

“European stocks are taking a breather after the big rally last week and the holiday in the U.S. today,” said Guillermo Hernandez Sampere, the head of trading at MPPM EK in Eppstein, Germany. His firm manages about 250 million euros ($278 million). “We’re continuing to see a shift from financials and periphery stocks to safe haven assets such as gold miners. Italian banks will remain losers even with government support because the main opinion is that they’ll remain under-capitalized.”

Italy’s FTSE MIB Index was the biggest decliner in western-European markets, sliding 1.7 percent, as its lenders dropped after the ECB requested Monte Paschi to draw up a plan for tackling its bad-loan burden, reducing its load of soured debt. Automakers and real estate companies were the biggest decliners among industry groups. S&P 500 Index futures expiring in September added less than 0.1 percent.

The Stoxx 600’s 50-day moving average was close to crossing below its 100-day mean. The U.K.’s FTSE 100 Index slipped 0.8 percent after coming close to entering a bull market. It surged 10 percent in four days, the most since November 2008, amid a weakening of the pound. The nation’s homebuilders slid on Monday as a report showed construction shrank at its fastest pace since 2009 in June. 

Among companies moving on corporate news, Deutsche Lufthansa AG rose 1.2 percent after sticking to its forecast for higher earnings this year. RWE AG climbed 3.5 percent as Raymond James said the spinoff of its new renewable energy, grid and retail business could drive a rerating.

Rightmove Plc fell 6.4 percent after Barclays Plc cut the shares to the equivalent of a sell, saying they’re expensive after the Brexit vote. Group Plc tumbled 11 percent, the most in the Stoxx 600 after Monte Paschi, after the brokerage lowered its recommendation to neutral rating.

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