FRANKFURT: Europe’s STOXX 600 posted its steepest decline in three weeks on Thursday, dragged lower by weakness in bank shares, while higher oil prices and rising yields on French bonds dampened risk appetite further.
The pan-European index ended more than 1 percent lower at 637.74 points. The euro zone banking index was the biggest laggard, declining 4.2 percent for its weakest day since March.
Spain’s Bankinter fell 7.6 percent after reporting results, which showed that higher interest rates increased deposit costs and pressured margins in the third quarter.
Barclays fell 2.3 percent following a smaller-than-expected third-quarter profit. The bank said it is cutting around 5,000 jobs, or 5 percent of its workforce, this year.
European earnings have generally been solid, at times helping investors look past a bleak economic backdrop. The declines on Thursday, however, show how quickly sentiment can sour when disappointing results collide with economic uncertainty.
“We have some big concerns in the market,” said Joost van Leenders, senior investment strategist at Van Lanschot Kempen Investment Management, referring to the Middle East conflict that sent Brent crude futures to a five-month high on Thursday.
“You have those risk factors and the positive factors which vary from day to day… (which can cause) a bit of volatility,” he said.
Additionally, the yield spread between France’s 10-year bond and German Bunds also hit a fresh 15-year high amid political uncertainty and protests in France.
“The widening of the spread between French sovereign bonds and those in the rest of the euro zone probably has further to run over the coming months,” wrote Jonas Goltermann, chief markets economist at Capital Economics.
Hermes fell 5 percent after the Birkin bag maker posted slightly weaker-than-expected quarterly revenue, with the drop weighing on the luxury index.
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