Europe: Stocks dip as Italian banks hit by windfall tax; Novo Nordisk jumps

EUROPEAN shares fell on Tuesday (Aug 8) as Italian banks were hit after the Cabinet approved a 40 per cent windfall tax on lenders, though a jump in shares of drugmaker Novo Nordisk after positive data on its obesity drug helped limit losses.

Italian banks such as Intesa Sanpaolo, Banco BPM and UniCredit fell between 5 per cent and 9.1 per cent after Deputy Prime Minister Matteo Salvini said a 40 per cent levy on banks’ extra profits will fund items such as a reduction of the tax wedge, tax cuts and financial support to holders of mortgages on first homes.

The pan-European Stoxx 600 index fell 0.2 per cent, while Italy’s banking-heavy FTSE MIB, which had rallied to multi-year highs recently, dropped 2.1 per cent to hit its lowest level in four weeks.

Broader eurozone banks tumbled 3.5 per cent in their worst day since March, also hurt by news that ratings agency Moody’s cut credit ratings of several small- to mid-sized US banks and said it may downgrade some of the biggest lenders in the United States.

China-exposed miners shed 1.8 per cent after data revealed imports and exports in the world’s second-largest economy fell much faster than expected in July, threatening growth prospects and heightening pressure on Beijing to provide fresh stimulus.

“Both of those factors (Italian windfall taxes and weak China trade data) are contributing to this risk aversion that’s sweeping across markets,” said Laura Cooper, senior macro strategist for iShares EMEA at BlackRock.

“When we look at Italian banks, we are seeing signs of pressure but this is coming after quite exceptional performance where the FTSE MIB has been the outlier across the continent.”

Novo Nordisk soared 17.3 per cent to a record high, causing its market value to top US$300 billion, after the Danish drugmaker said a large study had shown its obesity treatment Wegovy also had a clear cardiovascular benefit.

Hopes that the Federal Reserve and the European Central Bank (ECB) are near the end of their tightening cycle had pushed the Stoxx 600 to over one-year highs last month. But markets have hit a rough patch recently on reports showing slowing economic growth in Europe and China.

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“It is just underpinning this challenging macro backdrop that markets have ignored more recently, focusing more on the soft landing narrative that they’re seeing play out in the US,” Cooper added.

Germany’s DAX index fell 1.1 per cent after data showed inflation eased to 6.5 per cent in July, in line with economists’ expectations. REUTERS