European Stock Markets Hammered After EBA Stress Tests

(eToro Blog)  Monday’s stock market action in Europe showed increasing concern over the possibility of a banking crisis after Friday’s release of the European Banking Authority’s bank stress tests of 91 Eurozone banks. The FTSE 100 dropped 90.85 points to 5,752.81 down -1.6 percent, the CAC40 shed -75.88 or -2.0 percent to close at 3,650.71 while the DAX dropped -112.20 also losing -1.6 percent closing at 7,102.92.

FTSE

Losing stocks were led by the banking sector in the FTSE, with UK banks hit especially hard. Both Lloyd’s and Barclay’s ended the session at two-year lows with Lloyd’s down seven and a half a percent, Barclay’s down seven percent and the Royal Bank of Scotland sliding six percent to close at its lowest in 18 months.

The engineering sector also put pressure on the FTSE with IMI, dropping -4.5 percent to £10.37, GKN losing -4.6 percent to 228p and Charter International, losing -3.8 percent to close at 788p. The mining sector was the FTSE’s overall winner on Monday as the price of gold reached yet another all time high, trading up to $1,604.36 per ounce. Mexican mine Fresnillo gained +2.1 percent to close at £16.59 while Rangold Resources rose +1.7 percent to close at £55.60.    

DAX

After losing -2.5 percent last week, the DAX Index lost another -1.6 percent on Monday, led by banking shares. The EBA stress tests showed only 8 of the banks had a capital deficiency. One bank that failed the stress test but pulled out of the testing was the German Landesbank Helaba. Nevertheless, the banking sector was the hardest hit on the DAX. Commerzbank, one of the banks that passed the stress test, dropped 0.116 or 4.6 percent to close at €2.384 while Deutsche Bank was down -1.28 or -3.45 percent to €35.87. Specialty packaging manufacturer Gerresheimer, gained +3.9 percent to close at €36.61. The medical sector also showed some strength with Dax Fresnius Medical Care, up +1.1 percent to close at €54.36.  

CAC 40

Banking shares led the CAC index down with Societe Generale losing 1.88 or 5.4 percent to close at €32.91, while BNP Paribas lost 1.77 or 3.9 percent to close at €43.43.
Gainers on the CAC included Vinci up 1.56 percent to €81.20, Tf1up 1.52 percent to €28.03 and Carrefour, up 1.42 percent to €43.69.

Overall short-term sentiment in the European indices has turned decidedly bearish. With a major economic summit on Thursday, traders are looking to a resolution of the Greek financial crisis and a clear strategy from European leaders on how further contagion of the financial crisis can be avoided.