Europe: Shares close at three-week low as banks, miners wobble

[LONDON] European shares dropped on Friday with banks and miners falling as a raft of disappointing earnings updates and political worries dented sentiment.

The STOXX 600 was down 0.8 per cent at its close, erasing gains made earlier in the week and snapping a two-week winning streak. This was the index's lowest closing level in three weeks.

Basic resources stocks were the biggest sectoral fallers, down 2.1 per cent after metals prices dropped, while banks were also under pressure, with the sectoral index falling 1.4 per cent and touching its lowest level since early December.

This followed disappointing results from UK heavyweights Standard Chartered and Royal Bank of Scotland, and further weakness among Italian and French banks.

Standard Chartered fell 2.7 per cent after it said it would not pay a dividend for 2016 due to restructuring costs, while RBS fell 4.5 per cent as it reported a 2016 loss of 7 billion pounds due to higher misconduct charges and restructuring costs, scoring its ninth straight annual loss.

The Italian banking index also fell 2.4 per cent. Traders said the sector was hit by a surge in Italian government bond yield spreads, which more than offset initial enthusiasm for the successful outcome of UniCredit's 13 billion euro cash call.

After a higher open, UniCredit ended 2.3 per cent lower.

French banks BNP Paribas, Societe Generale and Credit Agricole, whose stocks are seen as particularly sensitive to the outcome of the upcoming French presidential election, all fell around 1.5 per cent.

The latest opinion polls show far-right, eurosceptic candidate Marine Le Pen remaining the favourite to win the first round in April, but still losing in the run-off.

"If the polls are wrong, a Le Pen victory would likely raise investor fears given her proposal to reintroduce a national currency and to hold a referendum on EU membership," analysts at UBS said. Under such a scenario, they said investors should sell sectors such as financials that fall when spreads rise.

German stocks were also hit by political worries, with the blue chip DAX dropping 1.2 per cent as bond market jitters hit equities.

Overall, Saipem was the biggest faller, down almost 7 per cent after the Italian oil services company said it did not expect any recovery for the industry this year in spite of higher crude prices.

On the positive side, Ingenico was the biggest gainer on the STOXX, up 7.2 per cent, after a well-received earnings update.


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