Europe open: Equity markets in the red as bank stocks weigh

European stocks edged lower in early trade, unable to hold on to opening gains following downbeat sessions in the US and Asia, as concerns over global growth took hold again.

At 0900 GMT, the benchmark Stoxx Europe 600 index was down 0.4%, Germany’s DAX was 0.1% lower and France’s CAC 40 was 0.7% lower.

This followed on from a weak session in Asia, where Japan’s Nikkei 225 closed down 5.4%.

Italy’s FTSE MIB underperformed its European peers, down 1.8%, with Banca Popolare di Milano on the back foot despite saying net profit rose 24% in 2015.

“European equities are trading lower this morning as early attempts of a rebound faded quickly after yesterday’s steep decline on the back of more bad economic data out of Germany and overall prevailing bearish sentiment,” said Markus Huber, senior analyst at Peregrine & Black.

“Adding to the already negative sentiment are also sharp declines in several Italian bank stocks this morning and hefty losses in the Nikkei overnight. The fact that there is very little additional economic data scheduled to be released today doesn't necessarily bode well for stocks as it might take till tomorrow when Fed chief Yellen testifies on Capitol Hill until stocks form a bottom.”

Banks were under pressure again, with the Stoxx Europe 600 index for the sector down 1.8%.

“European banks face a host of problems, including falling profits, a slowing global economy and negative rates reducing their ability to boost their profitability, at a time when a lot of them are being encouraged to boost lending to the wider economy as well as improve their capital buffers,” said Michael Hewson, chief market analyst at CMC Markets.

“Quite simply they can’t do all of them at the same time.”

Much weaker-than-expected data added to the negative mood on Tuesday, as figures from the Economy Ministry showed German industrial production unexpectedly fell in December.

Output was down 1.2% from the previous month, when it dropped a revised 0.1%, versus economists’ expectations for a 0.5% rise.

In terms of individual stocks, tour operator TUI AG was under the cosh after it reaffirmed its 2016 earnings guidance but reported a wider net loss for the first quarter.

Pandora fell sharply. Although the Danish jewellery maker lifted its dividend and reported a rise in fourth quarter net profit, the results were below analysts’ expectations.

On the upside, however, French drug maker Sanofi edged a little higher after it posted a drop in fourth quarter net income but said 2016 earnings per share were likely to be stable.

Biotechnology firm Actelion was in the black after reporting a 9% increase in 2015 core earnings.

Vesta Wind Systems was also higher after revealing better-than-expected fourth quarter revenue and upping its dividend.

Legal & General rallied after the insurer and investment manager updated the market with details of its annuity bond portfolio.

Oil prices recovered, with West Texas Intermediate up 2.1% at $30.32 a barrel and Brent crude up 1.2% at $33.26.