Europe midday: Italian stocks suffer heaviest losses as bank shares slide

At midday, the benchmark Stoxx Europe 600 index was down 0.7%, while Germany’s DAX was 0.9% lower. Italy’s FTSE MIB suffered the heaviest losses, down 1.5% as bank stocks slumped amid concerns the referendum on constitutional reform could precipitate the fall of Prime Minister Renzi’s government.

On 4 December, Italians will be asked to decide whether to accept a package of constitutional reforms put forward by centre-left Prime Minister Matteo Renzi, who has said he would resign if the proposals are rejected.

Market participants are concerned that if this results in a 'no' vote, political uncertainty will ensue, making the task of sorting out non-performing loan issues at the country’s banks even more difficult.

In France, the CAC 40 was down 0.8% as Francois Fillon won the primary race to become the French right’s presidential candidate next spring.

Meanwhile, oil prices were weaker but off lows, with West Texas Intermediate and Brent crude down 0.2% to $45.96 a barrel and $47.16, respectively. Prices fell sharply on Friday after Saudi Arabia said it wouldn’t meet with non-OPEC Russia ahead of the OPEC summit in Vienna as originally planned.

Saudi Arabia, which is the world’s largest oil producer, said it would not attend the meeting unless there was “a clear decision from OPEC” on production cuts.

However, a report in the Financial Times on Monday suggested Saudi has offered to cut its production by 4.5% from its current level of 10.5m barrels a day. It was also said to have demanded that Iran’s production be frozen at the current level of 3.8m barrels per day.

Spreadex’s Connor Campbell said: “Despite Brent Crude clawing its way back above $47 per barrel the major European indices all remained in the red this morning.

With the likes of Unicredit and Banca Popolare di Milano dropping around 4%, and the ever-troubled Monte dei Paschi plunging 15% as it revealed legal claims totalling €8.5bn, Campbell said “the market has taken a good look at Sunday’s Italian constitutional reforms referendum and decided it doesn’t like what it sees. The vote is being labelled Italy’s Brexit-moment – if ‘no’ prevails it could lead to political chaos in one of the eurozone’s most precariously balanced members.”

Elsewhere, Aberdeen Asset Management was a high riser after its annual results were in line with expectations and the company maintained its dividend.

Antofagasta edged higher after agreeing to sell the Michilla mine to Chilean mining group Haldeman Mining Company for up to $52m following the closure of the mine at the end of last year.

Swiss food group Aryzta was under the cosh after it reported a drop in quarterly revenue due to lower sales in North America.

Tesco fell following a report in The Times that investigators are looking into whether Tesco Bank ignored a warning about a security flaw in its payment system that allowed fraudsters to steal millions of pounds from the accounts of thousands of its customers.