European Factors to Watch-Shares to extend losses, banks in spotlight
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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. Continuación...