Europe midday: Italian banks tank on levy; China data disappoints

European shares were lower on Tuesday as weaker-than-expected trade data from China and poor UK retail sales survey data hit sentiment, while Italian bank stocks plunged after the government introduced a 40% windfall tax on profits.

The pan-regional Stoxx 600 index was down 0.40% with all major bourses lower.

China’s imports and exports slumped further than expected last month, official data showed on Tuesday, reflecting a stagnating recovery in the world's second-largest economy and increasing pressure on Beijing to provide more stimulus.

Imports in July fell 12.4% year-on-year, much worse than the 5.6% forecast by economists. Exports also fell faster than expected, contracting by 14.5%, after June’s 12.4% fall.

The trade surplus rose to $80.6bn in July from $70.6bn against a consensus of $70.0bn.

"China’s exports are likely to continue falling in H2, as the U.S. is likely to enter a mild recession, while the Eurozone economy probably will remain weak," said Duncan Wrigley, chief China+ economist at Pantheon Macroeconomics.

Economic data from the UK also soured the mood. The British Retail Consortium reported that annual retail sales growth slowed to just 1.5% in July, down from 4.9% in June. Like-for-like sales growth fell from 4.2% to 1.8%.

Meanwhile in Germany, consumer prices in Europe's largest economy increased 0.3% in July, unchanged from June. The annual figure fell to 6.2% from 6.4% in June.

In equity news, shares in Italian banks were hammered after the government approved a 40% windfall tax on lenders’ profits for the rest of the year.

BPER Banca, Banco BPM, Intesa Sanpaolo, UniCredit and FinecoBank all slumped on the news.

Italian Deputy Prime Minister Matteo Salvini told a news conference on Monday that the 40% levy on banks’ extra profits will be used to cut taxes and offer financial support to mortgage holders.

Abrdn shares fell despite it announced a doubling of its buyback programme, while rival Quilter surged as saw annual earnings at the top end of guidance.

Hotels operator IHG gained as it reported a sharp jump in half-year profit as the travel sector continued to rebound from the Covid pandemic.

Reporting by Frank Prenesti for Sharecast.com