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LONDON, Feb 9 (Reuters) - European shares were expected to extend the previous session’s steep losses on Tuesday, with the banking sector seen coming under further pressure on signs of stress in the sector.
By 0709 GMT, futures for the euro zone’s blue-chip Euro STOXX 50, Germany’s DAX, France’s CAC and Britain’s FTSE were down 0.4 to 1.0 percent.
Futures on the Euro Stoxx Banks index also fell 0.7 percent.
“The widening in credit spreads and the focus now on credit default swaps suggests that the pain is not going away anytime soon. There is huge demand for portfolio protection in all asset classes and it just doesn’t feel like we are going to see a major turn anytime soon,” Chris Weston, chief market strategist at IG, said.
“There is a genuine concern that stress in asset markets will start affecting real economics ... This period of sustained volatility and deterioration in credit will impact businesses.”
The cost of insuring bank debt against default climbed on Monday to its highest since late 2013. Borrowing costs in Spain, Portugal and Italy jumped as investors demanded a fatter risk premium over safer German paper, where two-year yields hit record lows at minus 52 basis points.
The STOXX Europe 600 banking index fell 5.6 percent in the previous session, taking its total losses to around 24 percent this year on concerns about banks’ profitability and capital strength in an environment where monetary stimulus continues to put pressure on margins.
Deutsche Bank fell 9.5 percent on Monday as concerns mounted about its ability to maintain bond payments. The German bank said late on Monday that it had “sufficient” reserves to make due payments this year on AT1 securities.
The sell-off in the European banking sectors spread to other markets. Japan’s Nikkei share average tumbled 5.4 percent on Tuesday, with banks taking the brunt of the sell-off, while a stronger yen dragged down stocks across the board.
The pan-European FTSEurofirst 300 index closed 3.4 percent weaker at 1,239.68 points in the previous session, its lowest level since October 2013.
Investors will pay even more attention than usual to the testimony of U.S. Federal Reserve Chair Janet Yellen before the House Financial Services Committee on Wednesday, seeking any clue to the strength of the U.S. economy that might underpin the dollar by keeping alive hopes that the central bank may continue on its rate-hiking path.
The company reported lower fourth-quarter earnings, hurt by declining sales in key divisions such as diabetes, oncology and prescription drugs, but said it expected 2016 earnings per share to be stable.
Europe’s largest biotechnology company said that 2015 core earnings rose 9 percent, matching analyst forecasts, as the company was helped by rising sales of a new drug to treat a deadly heart-lung disease.
The lender said it has “sufficient” reserves to make due payments this year on AT1 securities, seeking to calm investors after its shares plunged almost 10 percent on Monday.
The world’s largest tour operator said bookings to Turkey this summer were down around 40 percent due to security concerns, as it reported a narrower first-quarter loss on Tuesday.
The consumer goods group has “a lot of wiggle room” to shoulder new acquisitions after paying off its debt, departing chief executive Kasper Rorsted said in an interview with business daily Handelsblatt.
The Swedish bank said it needed new leadership and that Chief Executive Michael Wolf was stepping down with immediate effect. Birgitte Bonnesen will serve as acting CEO and remain in her position as Head of Swedish Banking as it searches for a replacement for Wolf. For more on the company, click
U.S.-based health insurers Cigna Corp and Aetna Inc. have struck deals with Novartis AG for a performance-based price for the Swiss drugmaker’s new heart drug, Entresto, the companies said on Monday.
The Swedish bank reported fourth-quarter operating profit below expectations but proposed to pay an annual dividend in line with forecasts.
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The building materials group has got a revised order from the Competition Commission of India (CCI) to divest its interest in Lafarge India, including three cement plants and two grinding stations with total annual capacity of 11 million tons, it said.
The head of Italian lender Banca Popolare di Milano (BPM) sounded a cautious note on Monday about an expected tie-up with rival Banco Popolare, saying it was hard to know when merger talks might conclude. (Reporting by Atul Prakash; Editing by Sudip Kar-Gupta)