European stock markets retreated yesterday, as banking shares led by Deutsche Bank slumped on news US authorities were hunting down Germany’s biggest lender over a record fine.
Frankfurt’s DAX 30 was the hardest hit, closing down 1.5% at 10,276.17, while the Paris CAC 40 shed nearly 1% at 4,332.45 compared with the close on Thursday.
London’s benchmark FTSE 100 index ended the week slipping 0.3% at 6,710.28.
The US Justice Department is seeking up to $14bn (€12.5bn) from Deutsche Bank to resolve allegations stemming from the sale of mortgage securities in the 2008 crisis, the German financial giant confirmed.
It added that the DoJ had invited the bank to submit a counter offer, and said it expected to reach a “materially lower” figure in negotiations.
But the news hammered Deutsche Bank shares, which sank 8.5% to close at €11.99 in Frankfurt.
The US action was also felt across Europe’s banking sector, with shares in Royal Bank of Scotland in London shedding 4.4% to 185.6 pence, and in Paris, French lender Societe Generale slid 2.7% to €31.1.
The pursuit of Deutsche “has understandably sent ripples across the sector pool, especially UK-based RBS which awaits its own bad news from across the pond,” said Mike van Dulken, head of research at Accendo markets.
On the other side of the Atlantic yesterday US stocks also lost ground on weakness in bank as well as petroleum-linked equities affected by a retreat in oil prices.
Around mid-day in New York, the Dow Jones Industrial Average was down 0.45%, the broad-based S&P 500 fell 0.5% and the tech-rich Nasdaq Composite Index slipped 0.3%.
And US shares of Deutsche Bank plunged 9.2%, while large US banks also saw their share price hit, with Dow members Goldman Sachs and Citigroup losing nearly 1%.
The City of London business district is seen through windows of the Royal Bank of Scotland headquarters in London. Shares in RBS yesterday dropped 4.4% to 185.6 pence.