European stocks traded low on Monday, as investors kept an eye on banks and Brexit concerns tumbled the pound, in a session that will likely have few references with U.S. markets closed for Martin Luther King Day.
Nearing midday in Europe, the benchmark Euro Stoxx 50 lost 0.56%, France’s CAC 40 fell 0.56%, and Germany’s DAX 30 traded down 0.59%.
The Canadian ratings agency DBRS downgraded Italy’s credit rating on Friday after the market close to BBB from A, warning that the country’s banking sector remains weak amid a fragile economy.
Also putting downward pressure on European banks, investors continued to speculate on a hard Brexit for the U.K. ahead of British Prime Minister Theresa May’s speech on the matter scheduled for Tuesday.
Among the plans for new trade deals between the European Union (EU) and the U.K., British banks could lose their passport to do business in financial services.
Worries over Brexit also continued to punish the pound on Monday with cable down more the 1%, hitting its lowest level since the October 7 flash crash.
In European company news, focus was on the creation of a €46 billion ($49 billion) merger between eyewear industry giants Italy’s Luxottica Group (MI:LUX) and France’s Essilor (PA:ESSI). Shares were soaring 8% and 14%, respectively.
In other retail news, shares in H & M (ST:HMb) were off more than 2% after it reported the slowest pace of growth in comparable sales since last September.
Meanwhile, oil prices edged higher on Monday, as Saudi and Iranian oil ministers hit the wires, insisting that major oil producers were committed to sticking to their agreement to reduce output.
Energy stocks were trading lower, as French oil and gas major Total SA (PA:TOTF) fell 0.70% , Italy’s ENI (MI:ENI) lost 0.96%, while Norwegian rival Statoil (OL:STL) traded down 0.43%.
Financial stocks were also trading down, as French lenders BNP Paribas (PA:BNPP) fell 1.91% and Societe Generale (PA:SOGN) sank 2.03%, while Germany’s Deutsche Bank (DE:DBKGn) and Commerzbank (DE:CBKG) slumped 2.31% and 2.31%, respectively.
Among peripheral lenders, Italy’s Intesa Sanpaolo (MI:ISP) was off 1.30% and Unicredit (MI:CRDI) sank 2.70%, while Spanish banks BBVA (MC:BBVA) fell 1.70% and Banco Santander (MC:SAN) traded down 1.20%.
In London, the commodity-heavy FTSE 100 once again broke the general trend in Europe, inching up 0.04% as sterling continued to show weakness. A cheap pound drives up the value of multinational firms listed on the index, as it means their overseas earnings are worth more when converted into the British currency.
Shares in Glencore (LON:GLEN) rose 0.84%, Anglo American (LON:AAL) jumped 1.96%, while BHP Billiton (LON:BLT) and Rio Tinto (LON:RIO) gained 0.86% and 0.75%, respectively.
Energy stocks were mixed, as BP (LON:BP) lost 0.50% but rival Royal Dutch Shell (LON:RDSa) advanced 0.12%.
Financial stocks were also lower as shares in HSBC Holdings (LON:HSBA) slipped 0.13% and the Royal Bank of Scotland (LON:RBS) slumped 2.85%, while Barclays (LON:BARC) and Lloyds Banking (LON:LLOY) fell 2.04% and 1.50%, respectively.
Although U.S. stock markets will not reopen their doors until Tuesday, futures were trading lower. The Dow Jones Industrial Average futures fell 0.22%, S&P 500 futures dropped 0.26%, while the Nasdaq 100 futures lost 0.17%.