By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Italian banks steered European stock
markets lower on Monday after nine of the country's banks failed
the European Central Bank's stress tests.
Disappointing data on German business confidence also bruised
investor appetite.
Bank stress tests: Twenty-five banks flunked the European
Central Bank's stress tests that were released on Sunday, as they
face a capital shortfall of 24.6 billion euros ($31.2 billion).
However, 13 of those lenders have already taken steps to beef up
their capital buffers.
Emerging as the most troubled lender in Europe, Banca Monte dei
Paschi di Siena shares plummeted 22%, closing at the lowest level
on record. The ECB found that the Italian bank needs to find EUR2.1
billion in fresh capital to meet the stress-tests requirements.
Already on Sunday, the bank said it has hired Citigroup and UBS to
help with options to plug the hole and a possible solution could be
a merger or even a sale, according to a person close to the
matter.
In total, nine Italian banks failed the tests, but five of them
have already plugged their capital holes. Remaining banks are Banca
Carige , down 17% in Monday's trade, Banca Popolare di Milano ,
down 4.4%, and Banca Popolare di Vicenza. The losses weighed on the
FTSE MIB index , which closed 2.4% lower at 19,028.67. Read: Banks
shares catch a cold even after surviving health check
British banks were not subject to the ECB's stress test, but
were instead assessed by the European Banking Authority. All four
U.K. banks in the test were given a green light, although Lloyds
Banking Group PLC (LYG) only narrowly passed. Lloyds shares were
down 1.8% in London.
Ifo data: European stock markets were also hit by data from the
Ifo Institute showing business confidence in Germany fell to a
22-month low in October, down to 103.2 points from 104.7 points in
the previous month. The figure was also below analysts'
expectations of 104.5, in a poll by The Wall Street Journal last
week.
"The outlook for the German economy deteriorated once again,"
the institute said in the release.
Broader market reaction: The Stoxx Europe 600 index fell 0.6% to
close at 325.10, after trading as high as 330.06 earlier in the
day.
Germany's DAX 30 index dropped 1% to 8,902.61, while France's
CAC 40 index lost 0.8% to 4,096.74. The U.K.'s FTSE 100 index
slipped 0.4% to 6,363.46. Read: Banks knock FTSE 100 lower after
stress tests
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