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Dec 29, 2016

European Markets at Close Report on December 29, 2016: European Stocks Break 3-Day Winning Run, Deepen Losses for 2016

Sara Sjolin

Europe’s benchmark stock index deepened its loss for the year on Thursday, breaking a three-day winning streak as banks continued lower.

The Stoxx Europe 600 index SXXP, -0.35%  dropped 0.4% to end at 360.26, after closing at the highest level since Dec. 31, 2015 on Wednesday. As of Wednesday’s close, the index was just 2.76 points from entering bull territory, following a seven-week rally that was triggered by Donald Trump’s unexpected win in the U.S. presidential election. A bull market is defined as a 20% rise from a market bottom.
However, for the full year, the pan-European index remains set for a 1.5% loss, with banks pulling the index lower. The financial sector plunged in the beginning of the year on worries over the impact from negative interest rates, slow growth and nonperforming loans.
Read: European breakdown? Why the continent’s stocks are actually set for a solid 2017
On Thursday, banks were also among biggest decliners. Shares of Credit Suisse Group AG CSGN, -3.37% CS, -1.89%  dropped 3.4%, a day after The Wall Street Journal reported that the U.S. Securities and Exchange Commission is probing the bank over a Mozambican bond sale.
BNP Paribas SA BNP, -1.32% which is also under investigating for the bond sale, fell 1.3%.
Shares of embattled lender Banca Monte dei Paschi di Siena SpA BMPS, -7.48%  were still halted for trade. The stock has been suspended since Dec. 23 when the Italian government agreed to bail out the bank after the lender admitted it had failed to raise the €5 billion ($5.23 billion) as part of a last-ditch rescue plan.
However, plans for the government bailout will need to be approved by the European Union to ensure state-aid rules aren’t breached, German Bundesbank President Jens Weidmann, who is a member of the European Central Bank’s governing council, said Monday.
Other Italian banks have been hit by the Monte dei Paschi jitters and under pressure on Thursday. Shares of Banco Popolare SC BP, -3.76%  lost 3.8%, Banca Popolare di Milano Scarl PMI, -3.50%  dropped 3.5% and Unione di Banche Italiane SpA UBI, -3.13%  dropped 3.1%.
The FTSE Italia All-Share Banks Sector Index IT8300, -1.30%  fell 1.3%, setting it on track for a 38% slump this year.
Italy’s FTSE MIB index I945, -0.18%  dropped 0.2% to 19,203.94 on Thursday.
Other indexes: The U.K.’s FTSE 100 index UKX, +0.20%  ended 0.2% higher at 7,120.26 after a choppy session.
Germany’s DAX 30 index DAX, -0.21%  fell 0.2% to 11,451.05, while France’s CAC 40 PX1, -0.20%  lost 0.2% to 4,838.47.
Economic news: Lending to households picked up 1.9% in November, up from 1.8% in October according to data from the European Central Bank. Loans to firms grew by 2.2% last month, versus 2.1% in October.
“A pleasing set of news for the ECB,” said Howard Archer, chief European and U.K. economist at IHS Global Insight.
“The data fuel belief that the ECB is unlikely to make any adjustments to monetary policy for some considerable time to come,” he added.