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Jul 5, 2016

European Markets at Close Report on July 4, 2016: Europe Sinks at Close, on Global Growth Fears, But BoE Boosts FTSE

Continental European stocks finished sharply lower on Tuesday, as a fall in oil prices and concerns over global economic growth offset positive sentiment from the Bank of England's (BoE) new measures.

The pan-European STOXX 600 closed near-session lows, ending 1.7 percent down, with all sectors posting solid losses.
However, the U.K.'s FTSE 100 rose in afternoon trade, closing up 0.5 percent, although the domestically-focused FTSE 250 fell 2.1 percent.
This comes as sterling fell below $1.31 for the first time since September 1985, during trade.

Carney speaks

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In the U.K., the counter cyclical capital buffer rate for U.K. banks was cut with immediate effect to 0 percent from 0.5 percent of financials' U.K. exposure, the BoE said on Tuesday in its biannual Financial Stability Report. This will reduce regulatory capital buffers by £5.7 billion ($7.5 billion), raising banks' capacity to lend to households and businesses by up to £150 billion.
"Those U.K. households and businesses who want to seize viable opportunities … can be confident that they will be supported by the financial system," Bank of England Governor Mark Carney said at a media conference on Tuesday.

Italian banks in focus

The Italian banks were again in focus amid concerns over their health.Banca Monte dei Paschi di Siena was halted during session. Before it was suspended, shares were down 14 percent. This comes after the European Central Bank asked BMPS to slash its bad debts by over 40 percent in three years, Reuters reported.
"The fact is the Italian government is up the proverbial creek without a paddle with its banks, unable to bail them out and stuck with a portfolio of up to 360 billion euros ($400 billion) of non-performing loans that are strangling the life out of the Italian economy," Michael Hewson, chief market analyst at CMC Markets, wrote in a Tuesday note.
"Of those loans Monte di Paschi, it is estimated, has about 48 billion euros worth, and with a market capitalization of about 1 billion euros, it's not hard to see where its problems lie."

Unicredit however jumped over 5 percent before paring most gains after Goldman Sachs raised its outlook on the stock from "neutral" to "buy", adding that it would need to raise between 6.7 billion and 9.6 billion euros in extra capital to support and increase in so-called Common Equity Tier 1 ratio of 12 percent – a measure of a bank's financial strength.
Meanwhile, Switzerland's UBS was off over 3.5 percent after it received a disclosure order from the Swiss Federal Tax Administration to provide information based on a French request for international administrative assistance in tax matters. It concerns UBS accounts pertaining to current and former French-domiciled clients based on data between 2006 and 2008. UBS said it will "take legal steps to have the admissibility of the administrative assistance request evaluated by the Swiss Federal Administrative Court".

Brexit fallout continues

Elsewhere, fallout from the Brexit vote continued as Standard Life Investments suspending all trading in its U.K. real estate fund on Monday, sending shares in Standard Life off some 5 percent. Aviva Investors, the fund arm of insurer Aviva has also suspended its U.K. property trust with immediate effect. Aviva traded over 3.5 percent down in trade.
U.K. housebuilder Persimmon posted a 12 percent rise in revenue in the first half of fiscal 2016, but said it was too early to judge the effect Brexit could have on Britain's real estate market. Despite the positive results, Persimmon shares were off more than 6.5 percent, along with other housebuilders such as Bovis Homes and Taylor Wimpey.
In the telecoms space, CK Hutchison Holdings and Vimpelcom are in talks with Iliad to create a fourth Italian telecoms network operator, Reuters reported, citing two people familiar with the matter. Iliadshares were trading in the red.
Meanwhile, autos were off over 3 percent as a sector. This comes after Germany's cartel office said six car manufacturers and suppliers had their offices searched on June 23, as part of an investigation into steel price fixing; according to Reuters.
On the oil front, prices in both Brent and U.S. WTI tumbled over 4 percent each—trading around $47.90 and $46.80 respectively—as concerns that a potential slowdown in economic growth may sap demand forced prices lower. The anxiety over global growth, pushedU.S. stocks lower too.
Meanwhile in Asia, markets finished mostly lower, with shares in Australia falling amid an uncertain election outcome and an on-hold central bank. Chinese mainland markets bucked the trend however, trading slightly up on the back of positive services sector data.
—CNBC's Katy Barnato contributed to this report.