US Fines for European Banks and Dim ECB QE Hopes Drive Stocks Lower

Europe’s main stock indices and lower-rated government bonds slipped on Tuesday amid reports of new U.S. fines for banks and dimming prospects the European Central Bank will launch an asset- purchase program.

Wall Street was expected to start down 0.1 percent, as investors continued to hold off from making big bets going into a corporate earnings season that kicks off with Alcoa after markets close.

European equity indexes fell for a third consecutive day after reports that Germany’s largest lenders were negotiating a settlement with U.S. authorities over their dealings with countries blacklisted by Washington. The talks follow a huge fine for French lender BNP Paribas.

“These fines add to an existing uncertainty in the banking sector,” said Berenberg’s senior economist, Christian Schulz, pointing out that the balance sheets of the region’s banks are currently under review by the ECB.

At 0945 GMT, the pan-European FTSEurofirst 300 index was down 0.5 percent at 1,380.33. Germany’s Dax and France’s CAC were also down 0.5 percent, while weaker than expected UK factory output data dragged the FTSE 100 down 0.6 percent.

Shares in German lender Commerzbank (CBKG.DE) fell 4 percent as the New York Times reported it could pay at least $500 million in penalties. Its larger competitor Deutsche Bank (DBKGn.DE) saw its shares slip 1.3 percent.

The ECB has made unprecedented policy moves in recent months to stimulate bank lending and revive the euro zone economy.

But late on Monday ECB Executive Board member Sabine Lautenschlaeger showed the strength of opposition in some quarters to a program of asset purchases, which she said should be a last resort.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza