European Stocks Decline to Three-Week Low as Banks Extend Losses

Updated on
  • Commerzbank slides to record low after scrapping profit target
  • Lufthansa retreats after saying average ticket prices fell

Stoxx 600 Falls as Every Industry Group Declines

European stocks slid for a second day as lenders deepened their declines, investors assessed mixed earnings, and crude prices weighed on oil companies.

Commerzbank AG helped drag a gauge of banks to the worst performance of the 19 industry groups on the Stoxx Europe 600 Index, tumbling 9.2 percent after Germany’s second-biggest bank scrapped its profit target for this year, forecasting a drop in earnings. Total SA and Royal Dutch Shell Plc lost at least 1.5 percent, leading oil companies lower after crude descended into a bear market on Monday. Volkswagen AG fell 5 percent, leading declines among auto-related stocks after South Korea all but banned sales of its models and the state of Bavaria threatened to sue over the emissions-cheating scandal.

The Stoxx 600 slipped 1.3 percent to 335.47 at the close of trading. Shares slid yesterday as investor skepticism overshadowed stress-test results showing most of the region’s banks would keep an adequate level of capital in a crisis. 

“There doesn’t seem to be much confidence for banks making profit in this low-cost environment,” said Guillermo Hernandez Sampere, the head of trading at MPPM EK. “Oil prices were one of the main subjects in Q1 and now it’s back, but the situation hasn’t changed. There’s still too much being produced by the large oil countries.”

The benchmark equity gauge is down 8.3 percent this year and 3.1 percent from its pre-Brexit level, despite in July posting the biggest monthly gain since October. Record outflows from European stock funds and thin volume last month underscored investor’s lack of conviction in the rally amid concerns about the fallout of the U.K. leaving the EU, the efficacy of central bank stimulus and economic growth prospects.

Germany’s equity-benchmark DAX Index dropped 1.8 percent -- the most in four weeks -- as some corporate results disappointed investors. Metro AG lost 8.7 percent after posting third-quarter sales and profit that missed forecasts because of swings in currencies. 

Deutsche Lufthansa AG slipped 3.2 percent after saying that average ticket prices fell in the second quarter due to a combination of lower demand stemming from terrorist attacks and excess capacity across the airline industry. Infineon Technologies AG fell 4.9 percent after reporting third-quarter sales and earnings that missed analysts’ estimates because of weakness at its smartphone business.

Italy’s UniCredit SpA retreated 7.2 percent as Il Messaggero reported that the bank may consider a capital increase of as much as 8 billion euros ($9 billion). Intesa Sanpaolo SpA fell 3.8 percent after reporting a decline in second-quarter earnings. 

InterContinental Hotels Group Plc added 3 percent after the owner of the Holiday Inn and Crowne Plaza brands said first-half earnings rose and it increased its interim dividend despite difficult conditions in some regions. Shire Plc advanced 2.4 percent after saying that the $32 billion takeover of U.S. drugmaker Baxalta Inc. will boost earnings and sales this year.