Rolling business and financial news, as German sentiment slides againLatest: IFO index shows more German painEarlier: Italys oldest bank could be sold or merged 5.00pm GMT Europes stock markets have closed, and Italys Milan index has endured a bad day.The Italian FTSE MIB tumbled 2.4%, as the failure of nine of its banks to pass the ECBs banking examination drove shares down.Chiusura #Borsa: FTSE MIB -2.40%, DAX30 -0.95%, CAC40 -0.78%, Cambio /$ 1.271, DOW -0.14%Italian stocks and particularly Italian banks were pasted after coming in bottom of the pile in the stress tests with Banca Monte dei Paschi di Siena needing to raise 2.1bn euros to pass. Banca Monte dei Paschi can hardly be described as an Italian stallion, in fact if it were a horse after this many bailouts it would have been shot by now.UK's FTSE 100 weighed down by financials after banking health check http://t.co/FnLrWbKTaXThe British banks may have passed the European stress test but for traders the margin by which Lloyds passed was too close for comfort. It hardly instils confidence in the UK financial sector when the big five banks are given the all clear but the sector still finishes lower. The timing of the stress test could not be worse, with Lloyds and Standard Chartered issuing interim management statements tomorrow.Britain's FTSE 100 down 0.4 pct, Germany's DAX down 0.9 pct, France's CAC 40 down 0.8 pct #forex #fx 3.37pm GMT Time for a catch-up....Germanys economic outlook has darkened after business confidence slipped to its lowest level in 22 months, according to the IFO institute. Bank lending to the euro zone private sector is still on a falling trend, registering a 1.8% year-on-year rate of contraction in September. Loan repayments continue to exceed gross borrowing. In some sectors, the deleveraging process is probably, for the most part, autonomous; borrowers wish to scale down their operations in high-risk sectors such as real estate. In other instances, banks may well be pressing customers with large exposure to high-risk sectors to reduce their commitments and repay loans. In either case, the impact on sentiment of the ECBs stress test, even if favourable, is hardly likely to bring about a change in behaviour. The ECBs hope is that banks new lending to more productive sectors of the economy, and especially to small and medium-sized businesses, will outweigh continued deleveraging elsewhere. But the chances of this happening are not helped by the sudden darkening in euro zone economic prospects. The ECB is likely to find that credit availability, though necessary for sustained economic expansion, is not a sufficient condition for triggering growth when other factors are unfavourable.Dilma wins in #Brazil, as we expected. Since she thinks economy doing well, expect more of the same policies - which is, sadly, not good 3.03pm GMT The European Central Bank has announced that it bought 1.7bn worth of covered bonds last week, as it began its new stimulus programme.Those purchases are meant to encourage bank lending and end the credit squeeze hampering the eurozones recovery. 2.22pm GMT Over in Cyprus, a former central bank governor was been jailed for five months for tax evasion today.Christodoulos Christodoulou had pleaded guilty to not declaring a 1m payment from Greek ship-owner Michalis Zolotas to a company managed by his daughter. Full details here. 1.57pm GMT Another sign of slowdown. Americas service sector is growing at its slowest rate in six months, according to a survey just released by data firm Markit.The US Services PMI dipped to 57.3 this month, from 58.9 in September. US service sector activity growth eases to six-month low in October. #PMI at 57.3, down from 58.9 in Sep http://t.co/F0peMx9Zm3The flash PMI survey data show the pace of economic growth easing for a fourth consecutive month in October. The weakened growth of new orders and downturn in business optimism suggest that growth and hiring could slow further in coming months. Having signalled an annualised rate of GDP growth of approximately 3.5% in the third quarter, the October readings indicate that the pace of economic growth looks set to moderate in the fourth quarter, down to perhaps 2.5% or less if the PMI falls further in coming months. 1.21pm GMT One for the history buffs -- today is the 28th anniversary of Big Bang.Before 1986, the City worked rather differently to the way it does today. Old Etonians would roll in from the shires mid-morning, depart shortly after for a civilised lunch and a bottle of very nice Bordeaux at a discreet restaurant somewhere, then hop in a cab to the club for a few snifters of single malt, before being whisked back first-class to Londons leafy fringes.If you wanted to buy a stock, you approached your broker, who placed the order with a jobber cockney barrow-boy types who made the trade on behalf of the public schoolboys. It was all terribly, terribly cosy.The task of the financial authorities, not only here but elsewhere in the world, and especially in the United States, is to preserve the energy, competition and efficiency of todays financial system while clamping down on its conflicts of interest and its tendency to instability. I feel sure that this will eventually have to involve the barring of certain sorts of financial institutions from particular forms of financial activity. The Volcker Rule in the US and the Vickers reforms over here represent merely the starting point. OTDI 1986 the London Stock Exchanges Big Bang transforms the way shares are traded http://t.co/iiQr4IHEZP pic.twitter.com/xid2H8IM3I 12.42pm GMT As predicted earlier, shares are tumbling on the Brazilian stock market as traders respond to Dilma Rousseffs re-election with a flurry of sell orders.The Bovespa stock index has slumped by 6% at the start of trading, with oil explorer Petrobras leading the selloff:#Brazil's benchmark index Bovespa plunges 6% in 1st trading day after Rousseff win. pic.twitter.com/aZvWaCQ89I*PETROBRAS SHARES FALL 15% TO BRL13.41 IN SAO PAULOBrazi real suffering its own 7-1 thrashing after Dilma's victory. Worst performer in world. http://t.co/MzCiqCWC7c pic.twitter.com/WAR8gkjKFS 12.12pm GMT Italys government has made concessions to Brussels, after being challenged over its 2015 budget plans.Pier Carlo Padoan, minister of economy and finance, wrote to the EC today to outline 4.5bn in extra deficit-reduction measues.At the same time, it is my duty to remind you that the Italian economy is going through one of the most severe and lengthy recessions in its history. GDP declined by more than 9% with respect to the level of 2008. The economy is now in its third year of recession and at serious risk of deflation - or a prolonged period of very low inflation - and stagnation. A fourth year of recession is to be avoided by all means as it would be extremely problematic to pull the country out of such an economie environment. Furthermore, it would make debt sustainability much harder to be maintained. You can read Italy's (Padoan's) response to Katainen at the European Commission over its budget here. http://t.co/UdThPgBOjcItaly is going to do more - cuts of 4.5billion - to ensure it meets EU budget rules on the deficit. That leaves France in dispute.Renzi's move to -partly- address @EU_Commission's concerns and revise #Italy's 2015 draft budget puts Hollande in a tough spot. 12.12pm GMT The ban on short-selling isnt helping Monte Dei Paschis shares -- theyre now down 20%!Bank that performed the worst in the ECB's stress test RT @Schuldensuehner: Monte Paschi Shares Resume Trade In Milan, Down 20%. 11.48am GMT Brazils Real has tumbled this morning, losing 3% against the US dollar following Dilma Rousseffs re-election as the countrys president.Its going to be a rough day on the Brazilian stock market, where traders had hoped that her pro-business rival Aécio Neves would triumph. Shares in oil giant Petrobras have already tumbled 15%, in Frankfurt.Along with drop in real, #Brazil's Ibovespa futures fall 8.2%Wall Street Jornal laments 4 more yrs of "economic mediocrity".Financial world woke up today bitter that #Brazil remains on the Latinam leftThis is why these elections have been as emotional as ever, an us vs them. Because it takes guts to stand up to the west. #Brazil @dilmabr 11.15am GMT Just in..... UK retailers have reported their fastest quarterly sales growth in three years, easing fears that the sector was struggling.UK CBI October retail sales balance at +31 in October (unchanged). Three months to October best since Feb 2011Sales on our high streets are still ticking along and, with similar prospects next month, retail growth is looking more stable.The clothing sector in particular appears to be bouncing back after the mild weather in September deterred people from buying their winter warmers.'Sales on our high streets still ticking along and retail growth is now looking more stable' http://t.co/eKCQbydd86 11.01am GMT Oh dear, Monti Dei Paschi has just triggered another automatic suspension, as investors continue to sell heavily (via Milan trader @lemasabachthani)BMPS -20.3% (HALTED) 10.56am GMT Todays slump in Monte Dei Paschis shares is bad news for those traders who had driven its stock up last week.That optimism, ahead of the Bank stress tests/asset quality reviews, has now been punctured: 10.50am GMT Italy bans short selling on Monte dei Paschi as shares slump 20% http://t.co/GhuO4AYwoS 10.20am GMT Italys stock market regulator has just banned investors from short-selling Monte Dei Paschis shares today, or tomorrow, Reuters reports.That means traders cannot borrow stock in MDP to sell on the stock market, and then buy it back at a lower price to book a profit.FTW: ITALY'S MARKET REGULATOR SAYS BANS SHORT SELLING ON MONTE DEI PASCHI'S SHARES ON MONDAY AND TUESDAY 10.05am GMT Back in Italy, banking are still reeling from yesterdays stress tests and asset quality review.The financial sector is feeling singled out, after 9 of its lenders failed the examination. And this could fuel tensions between Italy and the rest of Europe.There was a surgical targeting of Italian banks with asset quality review (AQR) drones .The ECB targeted the banks with the lowest level of transparency and governance, and the highest links with the political system. 9.46am GMT German confidence began sliding as the West began to hit Russia with economic sanctions over the Ukraine crisis, flags up market strategist David Scutt.Chart: German IFO Survey. Russian sanctions started in April, unsurprisingly the high-point for both measures $EUR pic.twitter.com/zMadKc0AGz 9.40am GMT This latest slide in German business confidence suggests that Europes largest economy could be in for a bumpy ride in the fourth quarter, analysts say.Andreas Scheuerle, an economist at Dekabank, says that morale is now in a downward spiral (via Reuters).The original mood killers - geopolitics, euro zone weakness, German economic policy and deflation concerns - have led to big downward revisions of forecasts and the weaker economic expectations are now weighing on sentiment. 9.24am GMT Germanys economy has suffered another blow, with business confidence falling again to its lowest level in almost two years.The Munich-based IFO institutes survey of 7,000 firms showed the sixth consecutive fall in business sentiment.More on German business confidence: sentiment at lowest level in almost 2 years. Ifo economist sees zero growth for G in fourth Q#GermanyGerman IFO Current Conditions Index at 108.4 in October. Business expectations at 98.3. Both below TR forecasts for 110 and 98.9 9.10am GMT Monte de Paschi the main stress test casualty as authorities take a sceptical line on those loans they've been rolling over since 1472. 9.08am GMT The relief rally has reached Greece:Athens market up 1.5% at 0900 GMT, banks up 3.2%, following better-than-expected #stresstest results for Greek banks. | #euro #Greece 9.07am GMT Monte dei Paschi di Siena can trace its origins back to 1472 -- 20 years before Columbus spied the New World on the horizon.Analysts say the bank has been dogged by a series of strategic misstepsin particular its 2007 purchase of Banca Antonveneta for 9 billionas well as interference by local politicians in Tuscany and shortsighted management by its majority shareholder, a Siena-based charitable foundation.In March 2009, the bank turned to the Italian government for a cash infusion of 1.9 billion. In 2013 it went back for an additional 2.2 billion. Since then, problems at the bank compelled the foundation to sell down its stake to about 2%; new management at the bank has overhauled its strategy and shed assets. 9.02am GMT Italian banks, which failed the EBA stress tests, are sliding rapidly Banca Carige down 18%, Monte Paschi Siena down 15% 8.54am GMT Roberto Henriques, European credit analyst at JPMorgan, reckons the stress tests were rigorous enough: It does meet the credibility test. 8.53am GMT Should we be relieved, or worried, that only 25 European banks failed yesterdays examination, with just 14 still needing extra capital?Kit Juckes of Société Générale reckons you can view it either way: Doctor Daghi gave the European banking system a reasonably clean bill of health, the ECB observing only that a smallish number of banks have to raise a modest amount of capital. Its either a reassuring or a naive picture of the banking system, depending on how you want to read it. Our equity analysts conclude that this is good news for bank stocks on the whole, while from a macro point of view it was largely a non-event that allows us to move on to bigger issues. 8.43am GMT Banking analyst Sandy Chen reckons Lloyds Banking Group could struggle to pass the UKs own, tougher, stress tests, which are due in December.A particular driver behind a weaker result would be a bigger modelled fall in UK house prices... e.g. 19% in the EBA stress scenario, versus the 34% potential fall in the house price index that was set out in the BOEs April 2014 stress test guidelines. 8.32am GMT Shares in a second Italian bank, Carige Bank, have also slumped this morning, down 17%.Carige, which is the largest bank in Liguria, is expected to raise at least 500m through a rights issue after European authorities found an 810m capital shortfall in its books.Trading in Banca Carige suspended after shares opened down 17% after EBA #stresstests failed the Italian bank 8.28am GMT Austrian lender Raiffeisens shares have also surged, by 7.3%, after passing the stress tests. 8.24am GMT Another sign of relief -- shares in Austrian bank Erste Group have jumped by 7.5%. 8.23am GMT 8.21am GMT Italys Monte Dei Paschis shares are being hammered in early trading in Milan after it became the most high-profile casualty of the bank tests.Trading in the worlds oldest bank has just been temporarily suspended after they slumped by 15% in a rush of early selling.BMPS -15.00% (HALTED)raising the question of once again how much more money must be pumped into this bottomless pit of a bank that has had to raise extra capital each of the last three years. 8.11am GMT Most bank shares are rallying this morning, pushing the Eurostoxx Banking Index up by 1.7%.It tracks all the main banks across Europe, 8.10am GMT Shares in Germanys Commerzbank have surged by almost 9%, over in Frankfurt.Commerzbank opens up 9pct after stress test pass. 8.05am GMT The FTSE 100 has rallied 50 points at the start of trading, up 0.79% at 6439.Mike van Dulken, head of research at Accendo Markets, says:sentiment is being buoyed by the European bank Stress test results. 7.58am GMT Good morning, and welcome to our rolling coverage of the financial markets, the world economy, the eurozone and business.Theres mild relief in Europe this morning after yesterdays stress tests of the regions banks showed up fewer problems than feared.Eurostoxx50 futures up 1% now after ECB stress testsA slightly 'Gung-ho!' stance to earning season on both sides of the pond may trigger positive opening for Europe. FTSE +20, DAX +30, CAC +19The bank was one of nine Italian banks deemed to have failed the stress tests carried out by the European Banking Authority, which published its findings on Sunday and concluded 24 banks out of 123 it had tested across the European Union needed more capital.Monte dei Paschi di Siena, which is already in the midst of a restructuing exercise, said it had been penalised by the methodology used by the regulators and appointed UBS and Citigroup to advise it of its options and explore all strategic alternatives for the bank.Banca Monte Paschi, the main casualty of the ECB stress tests, called to open down 15% Continue reading...
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