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Dec 22, 2016

European Markets at Close Report on December 22, 2016: European stocks end Lower; as Banca Monte dei Paschi Stands on the Brink

marketwatch.com

Carla Mozee, Victor Reklaitis

European stocks slipped Thursday, as Banca Monte dei Paschi di Siena SpA’s 11th-hour bid to raise capital failed, dragging financial shares lower.

The Stoxx Europe 600 index SXXP, -0.21%  was down 0.2% to end at 359.82. The benchmark on Wednesday fell 0.2%, as banking shares throughout the region came under pressure.
See: When are European markets closed for Christmas and New Year’s holidays?
BMPS heads for bailout? In Milan, on the FTSE MIB index I945, -0.49% , Banca Monte dei Paschi di Siena shares BMPS, -7.48% closed down 7.5%, after tumbling severely at the open, then briefly turning positive.
Check out: 5 things to know about Banca Monte dei Paschi di Siena’s crisis
BMPS, the world’s oldest lender, had been trying to raise 5 billion euros in new private capital as it struggles under a bad loan burden. Those efforts look to have failed, after the bank said it had lost a key investor—thought to be Qatari—leaving BMPS waiting to hear whether the Italian government will bail it out.
A bailout could be announced as early as Thursday. Italian Daily IL Sole 24 Ore said the capital injection would be carried out in separate steps over the next two to three months.
Other Italian bank stocks were mixed. Banca Popolare di Milano PMI, +2.62%  gained 2.6%, Banco Popolare Societa Cooperativa BP, +2.45%  tacked on 2.5%, and UniCredit SpA UCG, +0.64%  rose by 0.6%, while Unione di Banche Italiane SpA UBI, -0.78%   moved down 0.8%. Overall, the FTSE Italia All-Share Bank Index IT8300, -0.07%  edged down 0.1% on Thursday.
Across the region, bank stocks largely sagged, pulling the Stoxx Europe 600 Bank Index FX7, -0.43% 0.4% lower.
“European banking stocks are expected to remain under pressure. [The] Italian banking crisis is enhanced by mounting tensions in Spanish banks, which are now due to pay billions of euros on mortgage deals after they lost the EU case over mortgage-floor clauses,” said Ipek Ozkardeskaya, senior market analyst at London Capital Group, in a note.
See: European court ruling leaves Spanish banks facing hefty payout
“Finding a solution to rescue Monte Paschi could trigger a short-term relief rally in the sector, yet the European banks will certainly remain on a slippery ground for a longer period of time,” said Ozkardeskaya.
Other movers: Actelion Ltd.’s stock ATLN, +4.14%  bounced up 4.1% as the Swiss drugmaker re-entered acquisition talks with Johnson & Johnson JNJ, +0.12%
The euro EURUSD, +0.1247%  was buying $1.0441, compared with $1.0431 late Wednesday in New York.
National indexes: Italy’s FTSE MIB index fell 0.5% to 19,121.26, while Germany’s DAX 30 index DAX, -0.11%  eased 0.1% to 11,456.10.
France’s CAC 40 index PX1, +0.02%  closed up less than 0.1% to 4,834.63, and the U.K.’s FTSE 100 index UKX, +0.32%  rose 0.3% to 7,063.68.
“With less traders on their desks and most investors planning where to spend their New Year’s Eve, markets have clearly entered the holiday mood,” wrote Hussein Sayed, chief market strategist at FXTM.
“We can barely see any significant moves in equities, fixed income, or even currency markets…as trading volumes shrank, suggesting that more consolidation is expected throughout the remaining days of 2016,” he added, but also cautioned that less volume doesn’t necessarily mean there will be no volatility.
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