Europe expected to retreat at open
European stocks were lower in morning trade Tuesday, dragged down by banking shares as worries about the health of the region’s lenders continued to weigh on sentiment.
The pan-European STOXX 600 was down 0.71 percent. The banking sector was once again front and center for investors just days after the conclusion of the European-wide stress tests. Italian Prime Minister Matteo Renzi told CNBC on Monday that Rome has resolved the country’s banking problem once and that investors should focus on weak spots elsewhere in Europe.
“Personally I (am) really concerned for the future of European institution(s) — not for Italian non-performing loans (NPL) but for the situation of other banks,” he said in an interview.
Barclays, BBVA, Commerzbank, HSBC and Societe Generale have joined a consortium of banks to pre-underwrite the capital increase forBanca Monte dei Paschi di Siena, one of Italy’s most troubled lenders, according to Il Sole 24 Ore. Shares of BMPS were in the red.
And Unicredit tanked and was briefly suspended from trade over concerns about its bad loan portfolio with investors worried it will need a larger-than-expected capital raise.
On the earnings front, Germany’s Commerzbank cut its full-year net profit target for 2016, due to caution from customers and the continued low interest rate environment, sending shares over 5 percent lower.
Shares of Swiss bank UBS was also deep in negative territory after Sonntagszeitung cited analyst estimates that UBS and Credit Suisse could face 2 billion Swiss francs each in fines from U.S. regulators due to the mis-selling of mortgage-backed securities, according to Reuters.Credit Suisse will also be removed from the STOXX Europe 50 index from August 8, sending shares in the lender lower.
RBA cuts rates
U.S. equities closed mixed in choppy trade on Monday, the first day of the month, amid falling oil prices while investors digested economic data, weighing on investor sentiment in Europe.
Meanwhile in Asia, markets traded mostly lower on Tuesday following the U.S. trading session, as traders anticipated the Reserve Bank of Australia’s rate decision. The central bank subsequently cut its cash rate by 25 basis points to 1.50 percent, a record low.
Earnings in focus
A number of other European corporates also reported earnings. In the auto space, BMW reiterated its guidance for 2016 after reporting a rise in core profit, helped by sales of luxury cars.
Meanwhile, German airline Lufthansa reported a nearly 12 percent year-on-year rise in earnings before interest and taxes (EBIT) for the first half of the year. The company warned however that the second-half of the year will be tougher with full-year adjusted EBIT for 2016 likely to come in below last year’s level. Lufthansa said it will continue with cost-cutting measures.
Intercontinental Hotels Group reported a rise in first-half operating profit and said that it was confident in the outlook for the rest of the year.
German chipmaker Infineon was over 4 percent lower after reporting a rise in operating profit in the three months to the end of June that missed analysts’ expectations.
Elsewhere in Germany, retailer Metro posted a surprise loss before interest and tax in the third quarter due to restructuring costs, sending shares lower.
Other major earnings include Dutch firm DSM which raised its full-year outlook after an 18 percent rise in second-quarter core earnings. Shares rallied over 3 percent.
In the U.K., building materials supplier Travis Perkins was in negative territory despite posting a more than 10 percent year-on-year rise in pre-tax profit for the first-half of the year. The company warned that Britain’s decision to leave the European Union created “significant uncertainty in the outlook for our end markets”.
Commodity players slide
Oil prices were under pressure Monday, with U.S. crude futures settling 3.7 percent lower at $40.06 after briefly dipping below $40. On Tuesday, crude had edged up again but traders said fuel markets continued to be dogged by excess production.
The oil and gas sector was sharply lower with Saipem down 3 percent after UBS cut its price target for the stock. The basic resource sector was also lower amid concern over global growth and demand for metals.
Source: CNBC
