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Europe: Shares slip as bank losses offset tech gains; FTSE hits new high

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[MILAN] European shares slipped on Monday as a pullback in bank stocks more than offset a stronger tech sector, while a drop in the pound drove Britain's FTSE 100 index to further record highs.

The pan-European STOXX index slid 0.4 per cent, while the FTSE 100 rose 0.4 per cent after hitting an all-time high of 7,243.76 points in its 10th straight session of gains.

The pound sank to more than two-month lows after weekend comments from British Prime Minister Theresa May sparked talk that Britain would drastically rework trade relations with the European Union after Brexit.

"Domestic populist politics trumps the trade card for now, it seems and that is weighing on the pound, whilst simultaneously giving another boost to the FTSE 100," Neil Wilson, senior market analyst at ETX Capital, said in a note.

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Banks were the biggest fallers in Europe - the sector's index lost 1.7 per cent and Italian lenders were down 3.5 per cent following a strong start of the year.

The sector has outperformed over the past weeks as hopes for fiscal stimulus in the United States under Donald Trump's administration from Jan 20 have further boosted bond yields, seen as supportive for bank margins.

But after the surge, some brokers have turned less bullish. Credit Suisse reduced its overweight stance on the sector in a global equity strategy note on Friday.

Germany's Fresenius Medical fell 6.8 per cent, making it the biggest loser on the STOXX, after it and US rival DaVita Inc received subpoenas from federal prosecutors investigating their ties with a charity that helps patients pay for kidney dialysis.

Among the biggest weights to the STOXX were also oil majors Royal Dutch Shell and Total. Oil prices fell sharply as signs that growing US production and record Iraqi exports had raised concerns that additional output would weigh on the market.

Among top gainers, French retailer Casino Guichard rose 3 per cent after an upgrade from Bank of America Merrill Lynch, citing a simplification of the group's corporate structure as a positive for the stock.

Tech stocks rose 0.7 per cent after an upbeat note from Citi, which expects the sector to have another bright year, citing appealing fundamentals and earnings prospects.

SAP rose 0.8 per cent to a fresh 22-year high after UBS said a survey of customers of the German software maker suggested that the company had room to lift its mid-term goals when it reports results late this month.

German carmaker Volkswagen rose 4.9 per cent with traders citing hopes a deal to resolve the US diesel emissions scandal could be close. Such hopes overshadowed news of the arrest of a top executive in connection with the investigation.