Europe close: Markets end in shades of red

Markets in Europe ended Wednesday in various shades of red, extending their losses into a third day, with stocks in lenders worsening to levels not seen in five years.

The Stoxx Europe 600 was down 1.67%, while Germany’s DAX also lost 1.67% and France’s CAC 40 was off 1.88%.

In London, the FTSE 100 declined 1.25% and the FTSE 250 dipped 0.41%.

Banks were particularly hard-hit, with Banco Popolare Societa Cooperativa, Banco Popular Espanol, Credit Suisse Group and Deutsche Bank all looking at record lows in late trading.

Fresh concerns about Italian banks and the region’s growth prospects were piling onto the existing worries about the fallout of the UK’s referendum decision to leave the European Union.

BlackRock slashed the region’s shares to ‘underweight’ with a negative outlook on the eurozone’s banking sector, while Societe Generale’s chairman warned the Italian banking crisis could spread across the continent.

“In the next three to six months, we’ll see a deterioration in the fundamental data, so last week’s rebound was just a rebound off technical and sentiment-driven levels,” said RMG Wealth Management chief investment officer Stewart Richardson,

“Now people are beginning to think about the real issues in the medium term and may be thinking there’s something not right in the system.”

Some traders weren’t so impressed by the market reaction, however, with Ayondo Markets chief trader Jordan Hiscott saying things were precarious long before the vote.

“Barely three years ago, Greece’s banking sector had pretty much collapsed, with the issue then spreading to Cyprus. What seems to have slipped under the radar is the fact that various major European banks had lent these countries large amounts of money,” he said.

“Now, less than two weeks after Brexit, the wheels seem to be coming off the EU banking sector entirely.”

Deutsche Bank was among the leading losers on Frankfurt’s DAX, after German factory orders failed to fire in May.

Other big lenders and financial stocks feeling the pressure were UBS Group, Lloyds Banking Group, Aviva, Aegon and Prudential.

Telecom Italia slid 11% after Xavier Niel - the majority shareholder in Iliad - revealed he planned to sell his investment.

Tullow Oil was tumbling downhill after it announced the $300m sale of convertible bonds.

Tesco fell after HSBC removed it from a list of top stocks in Europe, while competitor Wm Morrison slid after being downgraded by HSBC.

Gold and precious metals were on the up as investors drove prices up in a rush to safe havens - Fresnillo and Randgold Resources were both well ahead.

Oil prices were down, with Brent crude last down 0.55% at $47.70 per barrel and West Texas Intermediate down 0.43% at $46.40.