Europe midday: Stocks extend losses as Deutsche Bank leads banks lower

European stocks extended losses, with banks under the cosh as Deutsche Bank faces a $14m fine from the US Department of Justice, and as quadruple witching added to volatility.

At midday, the benchmark Stoxx Europe 600 index was down 0.8%, Germany’s DAX was off 1.1% and France’s CAC 40 was 1.2% weaker.

Meanwhile, oil prices retreated on the back of reports of increased exports from Libya and Nigeria. West Texas Intermediate was down 1.7% to $43.15 a barrel and Brent crude was 1.8% lower at $45.77.

Banking shares were under pressure, led lower by Deutsche Bank, which slumped nearly 8% after saying it had no intention of paying $14bn to settle civil claims regarding its handling of mortgage-backed securities that contributed to the 2008 financial crisis.

The Stoxx 600 sub-index for the sector fell 2.2%. Peers Credit Suisse and UBS fell 5% and 2.8%, respectively. Meanwhile in London, banks were the worst performers, with RBS and Barclays at the top of the FTSE 100 faller board.

Naeem Aslam, chief market analyst at Think Markets, said: “The banking sector is where most of the pain is today and investors who have their position in Deutsche Bank are getting simply crushed.

"This claim has not appeared out of blue, it was expected, but the number is nearly four-fold higher what analysts were anticipating and this is putting the company’s share under immense pressure. But our concern is that this could be just a start and other European banks could face a similar fate and this why investors are leaving the boat with respect to the banking sector.”

Elsewhere, corporate news was scarce. Aviation support and aftermarket services company BBA Aviation rose after announcing that, after a number of approaches and a formal review, it has reached agreement with John Menzies on the terms of the sale of commercial aviation services subsidiary ASIG for $202m cash.

The FTSE 250 firm said Menzies is funding the acquisition through raising additional debt and equity and, in addition to customary approvals, the transaction will require the approval of its shareholders.

Supermarket retailer Wm Morrison gained ground after Exane BNP Paribas upgraded the stock to ‘neutral’ from ‘underperform’ and lifted the target price to 200p from 165p following its first-half results on Thursday.

Friday marks the rare quadruple-witching event, the quarterly options expiry day, with volumes expected to be heightened as a result, IG's Joshua Mahony said.

"The shifting of such a huge amounts of contracts will likely drive a significant amount of volatility for the day, building on the substantial moves instigated last Friday."

Still to come on the data front, the US consumer price index is at 1330 BST, while University of Michigan sentiment is at 1500 BST.

Societe Generale said: “We look for a 0.1% rise in the headline CPI, but the core rate may have increased by only 0.1% again – which could give further ammunition to doves on the FOMC that September is not the time to raise rates."