June 16, 2016 / 11:21 AM / 2 years ago

Banks lead European stocks lower as Brexit worries dominate

(ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details) Adds details, updates prices)

* FTSEurofirst 300 and STOXX 600 near 4-month lows

* UBS and Credit Suisse fall on SNB capital warning

* Deutsche Bank shares touch record low

By Danilo Masoni and Sudip Kar-Gupta

MILAN/LONDON, June 16 (Reuters) - European shares fell on Thursday, with banking stocks dragging regional equity indexes towards their lowest point in almost four months in a market dominated by concerns over next week’s EU membership vote in Britain.

The risk of Brexit and fresh signs that interest rates would stay low for longer added to uncertainly surrounding the banking sector, already hit by slow growth and expectations of capital increases from southern European lenders.

A warning from the Swiss National Bank (SNB) that UBS and Credit Suisse would likely each need to raise an extra 10 billion Swiss francs to meet new leverage requirements added to the gloom.

“Regulation once again about to tighten, coupled with low rates for longer across the board, are clearly unsupportive for the banking sector,” said Stephane Ekolo, Chief European Strategist at Market Securities in London.

The pan-European STOXX 600 and FTSEurofirst 300 indexes fell 0.6 and 0.7 percent respectively by 1059 GMT.

The pan-European bank sector index was the second biggest sectoral faller after miners, while the euro zone bank sector fell as much as 2.8 percent to touch its lowest since August 2012.

Shares in UBS and Credit Suisse fell 1 and 2.6 percent respectively, while other European bank stocks also underperformed, with Deutsche Bank briefly touching a record low as it fell 2.3 percent.

Earlier on Thursday, the SNB kept rates steady, as did the U.S. Federal Reserve earlier this week, with both central banks citing uncertainty surrounding the UK vote.

Although betting odds still point to Britain deciding to stay in the EU, opinion polls have shown growing support for the “Leave” campaign.

“Brexit is becoming a lot more likely than initially expected and the market is indeed becoming more fearful. It is very much a binary event and until then buying dips and selling rallies seems the sensible idea,” said Hampstead Capital hedge fund manager Lex Van Dam.

The Fed’s latest policy moves pushed up gold prices, with shares in gold miner Randgold rallying 3.8 percent.

Gold’s relative appeal is enhanced when the Fed decides against raising rates, while its safe-haven status is boosted in times of economic uncertainty. Some traders saw the rising gold price as another sign of worries over Brexit.

Today’s European research round-up

ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). In a real-time, multimedia format from 0600 London time through the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will continue to be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.

If you have any thoughts, suggestions or feedback on this, please email mike.dolan@thomsonreuters.com.

Mike Dolan, Markets Editor EMEA.

$1 = 0.9634 Swiss francs Reporting by Danilo Masoni; editing by John Stonestreet

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