Banking stocks in sharp decline as Brexit fears mount

European shares fell yesterday, with banking stocks dragging regional equity indexes to touch their lowest point in almost four months in a market dominated by concerns over next week's British vote on European Union membership.

The risk of Brexit and new signs that interest rates would stay low for longer compounded the uncertainty surrounding the banking sector, already hit by slow growth and expectations of capital increases from southern European lenders.

A warning from the Swiss National Bank that UBS and Credit Suisse would likely each need to raise an extra 10 billion Swiss francs to meet new leverage requirements added to the gloom.

DUBLIN

The Iseq index followed other markets sharply lower yesterday as worries over the implications of a Brexit weighed on sentiment. However, while most European Indices rallied somewhat towards the end of the day there wasn’t much of a bounce in Dublin. The Iseq closed down 1.6 per cent or 104.62 points to 5,899.32.

“Between now and the vote on a Brexit next Wednesday the market will continue to be very volatile. Until we know the outcome people will be feeding off polls and that means things will stay unpredictable” was how one trader described the current state of play.

The main laggards yesterday were financials and stocks with heavy exposure to the UK.

Bank of Ireland was among the heaviest fallers on the day, dropping 3 per cent to 21 cents.

Paddy Power Betfair was weak, losing 2 per cent to close at €109.55. Ryanair was also down 2 per cent, underperforming the airline sector and ending at €12.56.

LONDON

Britain's main share index slipped to its lowest level in nearly four months due to growing nervousness about next week's vote on membership of the EU. The blue-chip FTSE 100 index closed down 0.3 per cent to 5,922.12 points, after falling to 5,899.97, its lowest since late February. Investors were also cautious after the Federal Reserve cut its growth forecast. Cyclical stocks were the worst hit, with the UK banking index falling 0.9 per cent and touching a two-month low. Shares in Royal Bank of Scotland, Barclays and Lloyds fell between 1.3 and 2.6 per cent.

Some mining stocks also came under pressure, with Anglo American and BHP Billiton down by 3 and 1.8 per cent respectively.

Gold producer Randgold Resources rose 4.8 per cent, the top gainer in the FTSE 100 index, to its highest in nearly two years on wider economic uncertainty.

EUROPE

Shares were lower across Europe as concerns over a possible Brexit mounted. The pan-European STOXX 600 and FTSEurofirst 300 indexes fell 0.7 and 0.5 per cent respectively. The STOXX 600 had fallen earlier to 318.51 points, its lowest intraday point since February 24th.

The pan-European bank sector index was among the biggest sectoral fallers, with a drop of 1.4 per cent, while the euro zone bank sector slid as much as 3 per cent to touch its lowest point since August 2012. Shares in UBS and Credit Suisse fell 0.4 and 1.4 per cent respectively, while other European bank stocks also underperformed. Deutsche Bank and UniCredit both fell more than 2 per cent after touching record lows.

NEW YORK

The S&P and the Dow were down for the sixth day in early trading as the Federal Reserve’s comments about an economic slowdown and the prospect of Britain’s possible exit from the EU spooked investors.

The Dow Jones Industrial Average was up 22.05 points, or 0.13 per cent, at 17,662.22. The S&P 500 was down 1.55 points, or 0.07 per cent, at 2,069.95. The Nasdaq was down 12.86 points, or 0.27 per cent, at 4,822.07. Financials weighed heavily on the S&P, with JPMorgan and Bank of America losing over 1 per cent each. – (Additional reporting: Reuters)