European shares closed at their lowest level in more than two years on Monday with investors concerned over the region's banks and slowing global growth.
Monday was an ugly day on Europe’s stocks markets with a deep and broad sell off of shares by investors worried over a economic global slowdown.
The pan-European FTSEurofirst 300 index closed down 3.4 percent at 1,239.68 points, its lowest since October 2013.
The banking sector was worst hit; among those that tumbled were Deutsche Bank, BNP Paribas, Santander and Barclays.
“Investors are starting to think that banks are not as solid as previously thought,” said Giuseppe Sersale, fund manager at Italy’s Anthilia Capital. He added the negative sentiment was compounded by signs of a US economic slowdown, persistent worries about China, and continued volatility in oil prices.
Analysts talked about mounting concerns that banks’ profitability will be squeezed by negative interest rates and prolonged central bank monetary policy designed to stimulate economic growth.
The cost of insuring the European financial sector’s senior debt against default also climbed to its highest level since late 2013.
European carmakers, media, construction and technology all lost value as they are sensitive to macroeconomic activities.
BGC Partners Market Strategist Mike Ingram said: “I think there are some very profound economic problems, and clearly there are political problems there as well, which complicates matters; it’s one of the reasons why I have not jumped on the band wagon with overweight European stocks. I am very happy not to be on that particular train wreck.”
Energy stocks also fell after crude oil slipped again from oversupply concerns and as a meeting between Saudi Arabia and Venezuela failed to reassure investors of measures to bolster sagging prices..
Greek pension problems
The main Greek stock market index in Athens plunged 7.87 percent to its lowest level in 25 years due to uncertainty that a bailout review by the country’s lenders could drag on.
Again it was banks that slumped with the country’s major lender National Bank of Greece falling 25 percent.
Greece is going through a fresh review of its bailout performance amid widespread opposition to government plans to again cut its spending on pensions by putting up workers and companies’ social security contributions which can only further depress a moribund economy.
Greece has promised to cut pension spending by 1 percent of GDP, or 1.8 billion euros, this year. Pensioners’ benefits have been cut 11 times already since 2010.
Mission chiefs of Greece’s lenders, the European Commission, the International Monetary Fund, the European Central Bank and EU’s bailout fund wrapped up a first week of talks in Athens on Friday. They were expected to return to Greece around February 15.