MW: Banks weigh on European stock markets; Barclays in focus
Miners lose ground, while airline stocks move higher
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) -- European stock markets moved lower Tuesday amid losses for the banking and commodities sectors, while airlines were among the few shares moving higher.
The Stoxx Europe 600 Index (ST:SXXP 259.03, -1.91, -0.73%) fell 0.6% to 259.32 points.
In the U.K., the FTSE 100 index (UK:UKX 5,388, -50.81, -0.93%) dropped 0.9% to 5,392.20, while the French CAC 40 index (FR:PX1 3,637, -47.87, -1.30%) fell 1.1% to 3,643.02.
The German DAX 30 index (DX:DAX 6,106, -48.71, -0.79%) was down 0.7% at 6,111.44.
U.S. stock market futures also pointed to a weaker start for Wall Street following the Labor Day holiday on Monday. See Indications.
Banks were among the biggest losers in Europe as regulators met in Basel to finalize new global rules on capital requirements and after The Wall Street Journal reported that the region's recent stress tests underestimated some lenders' holdings of government debt. See full story on the stress tests.
Germany's Die Zeit reported late Monday that banks could be required to hold a Tier 1 capital level of 9% under new rules dubbed Basel III, potentially rising to 12% in boom years in order to build reserves to pay for a downturn.
Separately the Journal report named Credit Agricole (FR:ACA 10.56, -0.39, -3.56%) and Barclays (UK:BARC 312.60, -10.25, -3.18%) (BCS 20.28, +0.97, +5.02%) as among the banks that excluded some sovereign holdings from their calculations, though it added it is impossible to gauge the number of banks or the overall effect of the practice. All the banks reportedly said they correctly followed the disclosure guidelines of regulators.
Shares in Credit Agricole fell 3.3%. French banks have some of the highest exposures to risky European countries such as Greece and other lenders in the country were also down sharply. BNP Paribas (FR:BNP 52.56, -1.36, -2.52%) dropped 2.2% and Societe Generale (FR:GLE 42.88, -1.44, -3.25%) fell 3.6%.
Barclays (UK:BARC 312.60, -10.25, -3.18%) (BCS 20.28, +0.97, +5.02%) was down 3.3% in London after it also announced that Robert Diamond, the head of its investment banking arm, will take over as chief executive of the entire group next year. See full story on Diamond.
Diamond will succeed John Varley, who plans to step down next March.
Oliver Russ, European fund manager at Argonaut Capital Partners, said worries about capital requirements were probably the biggest weight on the banking sector.
He noted the sector benefited from positive rumors in recent weeks about the rules being relaxed or staggered to prevent an excessive burden on the industry.
Russ said the biggest worry is likely to be that rules are implemented sooner than banks had hoped -- especially since the reported 2018 timeframe could mean the industry would be well into another banking cycle before the new requirements came into force.
He added, however that "at the end of the day, I don't think they will make the capital requirements too onerous."
In other banking news, the BBC reported that Stephen Green, chairman of HSBC (UK:HSBA 662.40, -0.40, -0.06%) (HBC 50.68, +0.32, +0.64%) , is planning to leave the bank to become the U.K. trade minister. Shares in HSBC outperformed the rest of the sector and traded broadly flat.
Outside the banking sector, mining stocks were also lower, with Rio Tinto (UK:RIO 3,427, -83.50, -2.38%) (RTP 52.52, -2.37, -4.32%) dropping 2.2% and BHP Billiton (UK:BLT 1,890, -30.00, -1.56%) (BHP 69.11, -1.69, -2.39%) down 1.4%.
The falls came after the Australian Labor Party gained the support of enough independent lawmakers to form a minority government. See full story on Australia's new government.
Most other sectors were also broadly lower, though several airline stocks moved higher following traffic data and a bullish broker note.
Shares in British Airways (UK:BAY 224.40, +3.60, +1.63%) rose 1.5% after UBS lifted its price target on the stock to 335 pence from 295 pence, saying it expects the group's strong yield recovery to continue until the end of the year.
Spanish airline Iberia (ES:IBLA 2.70, +0.05, +1.89%) , which has agreed a merger with British Airways, rose 2% in Madrid.
Shares in Air Berlin (DE:AB1 3.47, +0.00, +0.06%) gained 1.7% after the German airline announced a rise in passenger traffic in August.
Among a handful of other stocks posting solid gains, Germany's HeidelbergCement (DE:HEI 34.98, -0.17, -0.48%) , which has a big presence in the U.S., rose 1.4% in Frankfurt after President Barack Obama unveiled a $50 billion proposal to improve U.S. infrastructure.
