Tax Worries Test European Banks’ Best Stock Rally Since 2009

European banking stocks’ biggest rally in 16 years is faltering as the region’s hottest sector confronts the prospect of higher taxes and a surge in sovereign risk.

The Stoxx 600 Banks Index sank 4.5% last week — the most since April — as investors grappled with an onslaught of negative headlines covering a no-confidence vote in France, renewed calls for a windfall tax in the UK and the possibility of additional levies in Italy.