LONDON: European stock markets slid Tuesday, with shares in Italian banks hit hard by the announcement of a windfall tax on lenders.
Banks elsewhere also took a knock on concerns over the health of the US sector, analysts said.
The dollar continued to benefit from talk of yet another US interest rate hike, while oil prices retreated following more weak Chinese data.
European stocks end higher as defence firms hit record high
In Milan, share prices of Italian banks Intesa Sanpaolo to Unicredit and Monte dei Paschi di Siena lost between six and eight percent on news of the windfall tax, adopted by Prime Minister Giorgia Meloni’s ministers late Monday.
Fallout spread to French and German banks, with Credit Agricole down 2.8 percent around midday in Paris and Commerzbank losing 3.0 percent in Frankfurt.
The Italian government was “using part of the banks’ billion-dollar profits to help families and businesses affected by rising interest rates”, Deputy Prime Minister Matteo Salvini said on X, formerly known as Twitter.
Banks were also “under pressure across Europe after Moody’s cut its credit ratings on 10 small to mid-sized US banks”, noted Victoria Scholar, head of investment at Interactive Investor.
And it “warned it may do the same for some of the larger lenders such as BNY Mellon and State Street which have been placed on review for a possible downgrade”, she added.
Asia’s major stock markets were mixed amid concerns that the Federal Reserve would hike rates again, while another weak batch of trade data compounded worries about the struggling Chinese economy.
The positive sentiment that fuelled a rally for stock markets through much of July has given way to nervousness that while US inflation is coming down, officials will keep tightening monetary policy to make sure they have prices under control.
Analysts also warned that while the US economy remained in rude health after more than a year of rate hikes, fears of recession remained.
Wall Street’s three main indices enjoyed a strong start to the week Monday, with focus turning to the release of US consumer price inflation later in the week.
Key figures around 1000 GMT
London - FTSE 100: DOWN 0.5 percent at 7,513.59 points
Frankfurt - DAX: DOWN 0.9 percent at 15,806.12
Paris - CAC 40: DOWN 0.8 percent at 7,260.89
EURO STOXX 50: DOWN 1.2 percent at 4,286.12
Tokyo - Nikkei 225: UP 0.4 percent at 32,377.29 (close)
Hong Kong - Hang Seng Index: DOWN 1.8 percent at 19,184.17 (close)
Shanghai - Composite: DOWN 0.3 percent at 3,260.62 (close)
New York - Dow: UP 1.2 percent at 35,473.13 (close)
Euro/dollar: DOWN at $1.0970 from $1.1006 on Monday
Pound/dollar: DOWN at $1.2734 from $1.2783
Euro/pound: UP at 86.16 from 86.07 pence
Dollar/yen: UP at 143.08 yen from 142.47 yen
West Texas Intermediate: DOWN 1.3 percent at $80.85 per barrel
Brent North Sea crude: DOWN 1.7 percent at $83.87 per barrel
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