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 Bank shares weighed on European equity indexes which fell for a
third consecutive day, as Germany's largest lenders were said to be
negotiating a settlement with U.S. authorities over their dealings
with countries blacklisted by Washington. The talks follow a huge
fine for French lender BNP Paribas.
"These fines add to an existing uncertainty in the banking sector,"
said Berenberg's senior economist Christian Schulz, pointing out
that the balance sheets of the region's banks are currently under
review by the ECB.
At 0945 GMT, the pan-European FTSEurofirst 300 index was down 0.5
percent at 1,380.33. Germany's Dax was down 0.6 percent and France's
CAC down 0.4 percent. The UK's FTSE 100 also lost 0.5 percent,
weighed down by weaker than expected UK factory output data.
Shares in German lender Commerzbank <CBKG.DE> fell 3.5 percent as
the New York Times reported it could pay at least $500 million in
penalties. Its larger competitor Deutsche Bank <DBKGn.DE> saw its
shares slip 0.5 percent.
The ECB has made unprecedented policy moves in recent months to
stimulate bank lending and revive the euro zone economy.
But late on Monday ECB Executive Board member Sabine Lautenschlaeger
showed the strength of opposition in some quarters to a program of
asset purchases, which she said should be a last resort.
Many economists say such a program, known as quantitative easing,
might not prove as effective as it has in the United States because
Europe relies on traditional forms of bank lending more than capital
markets. ECB chief Mario Draghi has also said that might be the
case.
Berenberg's Schulz said he felt QE should only be used to fight a
future sovereign debt crisis stemming from the bloc's fragile
states. It was these lower-rated sovereign bonds that struggled on
Tuesday, with traders citing Lautenschlaeger's speech.
Yields on 10-year Greek, Portuguese, Spanish, Italian and Irish
bonds edged up between 1-4 basis points, although they remain near
all-time lows.
In currency markets, the big mover was sterling which fell against
the dollar after an unexpected dip in British factory and industrial
output, although strategists said the data was unlikely to curb the
pound's strength for long.
"Taken as a whole the UK data still points at quite a resilient,
robust recovery," said Valentin Marinov, a currency strategist at
Citigroup.
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The euro was little changed against the U.S. dollar as markets
waited for minutes on Wednesday of the Federal Reserve's last
meeting which will be scoured for hints on when its policy committee
might consider raising interest rates.
SAMSUNG WEIGHS
Asia was quiet overnight, with the region's stocks tracking sideways
as the earnings season kicked off with disappointing guidance from
regional tech heavyweight Samsung.
MSCI's broadest index of Asia-Pacific shares outside Japan was a
fraction firmer, touching a three-year high of 502.27 during the
session.
The U.S. earnings season starts with Alcoa <.AA> later on Tuesday
and dozens of major companies are scheduled to report next week,
including numerous Dow components.
Profits are forecast to grow 6.2 percent for the quarter, according
Reuters data, but investors see a chance of a return to double-digit
growth for the first time in nearly three years.
In commodity markets, gold edged a fraction lower to $1,319.50 an
ounce, having held to a relatively tight $1,305.90 to $1,332.10
range for the past two weeks.
Oil prices extended their recent decline as events in Iraq and
Ukraine have so far not led to any serious disruption in flows.
Brent LCOc1 dipped 57 cents to $109.61 a barrel and U.S. oil lost 20
cents to $103.32 a barrel.
(Editing by Catherine Evans)
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