Banking Shares Slide On Italy Budget Fallout
European stock markets slide on Friday, with Milan the biggest faller, after Italy’s new leaders pledged a budget overspend that triggered consternation from Brussels.
The trading of shares in some Italian banks was briefly suspended amid heavy price falls but Banco BPM remained on pause following a tumble of almost 11 percent.
Following the restart, BPER Banca was down a hefty 9.0 percent at 3.96 euros, UniCredit plunged 7.5 percent and Intesa Sanpaolo was down 7.2 percent.
Shares prices of major European banks outside Italy also slumped, with French lender Credit Agricole down 5.0 percent, Deutsche Bank sliding 4.0 percent and Royal Bank of Scotland losing 3.2 percent.
The euro also dropped heavily against the dollar.
“The Italian budget continued to cast a shadow over the markets on Friday, setting up a rocky end to a rocky month,” noted Connor Campbell, a financial analyst at Spreadex trading group.
“Turning to this afternoon and at the moment the Dow Jones looks set to dodge the kind of losses seen in Europe, with the futures suggesting a milder… decline.”
Asian markets had earlier closed higher, tracking Thursday’s rally on Wall Street where investors were buoyed by the Federal Reserve’s positive outlook for the US economy.
Benchmark crude oil, Brent North Sea, extended gains amid predictions that it could again hit $100 per barrel.
While concerns over the China-US trade row hang in the air, US equities continue to be supported by optimism that the global economy and companies are in rude health generally.
That was reinforced by the Fed on Wednesday as it lifted interest rates and indicated more to come over the next year citing the strong labor market and playing down concerns about vulnerabilities in the financial system.
Prospects of more US rate hikes has lifted the dollar this week against the euro, which has slid also as Italy’s populist government agreed on a budget deficit target of 2.4 percent of gross domestic product for next year, fuelling fears of a bust-up with Brussels.
On Friday those fears looked to be coming to fruition when EU Commissioner Pierre Moscovici hit out at the Italian move, which he called “beyond the limits of our shared rules”.
Crude prices extended gains on growing concerns about supplies following a decision not to increase output by key producers, just as Iran faces export sanctions and Venezuela continues to be dogged by political and economic crises.
Also, the US energy secretary this week ruled out using the country’s emergency stockpiles to ease prices.
Bloomberg News reported that the chief executive of oil and gas major Total, Patrick Pouyanne, saw prices swinging to the $100 levels last seen in mid-2014.
“Everyone’s worried about the tightness in supply at the moment and that’s continuing to push up prices,” said Will Yun, a commodities analyst at Hyundai Futures.
“But volatility is coming as we’re still waiting for a further response from the US.”
Key figures around 1045 GMT
Milan – FTSE MIB: DOWN 3.7 percent at 20,718.24 points
London – FTSE 100: DOWN 0.5 percent at 7,511.08
Frankfurt – DAX 30: DOWN 1.4 percent at 12,263.48
Paris – CAC 40: DOWN 0.7 percent at 5,501.88
Madrid – IBEX 35: DOWN 1.5 percent at 9,384.80
EURO STOXX 50: DOWN 1.2 percent at 3,408.13
Tokyo – Nikkei 225: UP 1.4 percent at 24,120.04 (close)
Hong Kong – Hang Seng: UP 0.3 percent at 27,788.52(close)
Shanghai – Composite: UP 1.1 percent at 2,821.35 (close)
New York – Dow Jones: UP 0.2 percent at 26,439.93 (close)
Euro/dollar: DOWN at $1.1591 from $1.1641 at 2100 GMT
Pound/dollar: DOWN at $1.3053 from $1.3078
Dollar/yen: FLAT at 113.39 yen
Oil – Brent Crude: UP 33 cents at $82.05 per barrel
Oil – West Texas Intermediate: DOWN one cent at $72.11 per barrel.