By Josie Cox
European markets edged lower Friday ahead of the results of
sweeping EU bank stress tests, with traders' mood darkened by news
that a case of Ebola was confirmed in New York City overnight.
In early trade, the Stoxx Europe 600 lost 0.3%, mirroring
declines on most major country indexes, after a three-session
winning streak.
On Sunday, scorecards for around 150 lenders are scheduled to be
made public in a choreographed series of announcements in London,
Frankfurt and other financial capitals across the continent,
designed to shine light how strong balance sheets are and how
capable banks are of surviving a deteriorating economic
environment.
"Following our assessment of several banking systems in a series
of reports published over the past year, we have identified
vulnerabilities in some banks in Italy, Greece, Portugal and
Germany, while most banks in Spain and France appear well
positioned," credit analysts and economists at Barclays wrote in a
note.
Earlier this week, Gildas Surry, an analyst at BNP Paribas SA,
said he expected a dozen small banks, including Austria's
Oesterreichische Volksbanken AG and Irish state-controlled lender
Permanent TSB, to fail the tests. Both declined to comment.
Mr. Surry also said that as many as 19 other banks would
technically fail the test but have raised enough capital since the
end of 2013 to satisfy regulators and avoid further action.
Elsewhere on Friday, Ebola reappeared on the market's radar
after a doctor who had recently returned to the U.S. from West
Africa tested positive for the virus.
Overall, at least 9,936 people have now been infected with Ebola
due to the West African outbreak, according to the World Health
Organization.
Kit Juckes, a strategist at Société Générale in London said that
while the news was "depressing", he didn't expect to see a major
ripple effect, beyond a dip in U.S. equity futures.
Corporate earnings also provided little solace for markets
Friday.
After the U.S. market close Thursday, retail giant Amazon.com
Inc. reported a net loss of $437 million in the third quarter,
worse than its year-earlier loss of $41 million.
In Europe on Friday, Germany's BASF SE lowered its outlook for
2015 and reported a 4.8% decline in third-quarter profit, hurt by
the slowing global economy and weaker demand in Europe.
In the U.K. retail space, Tesco PLC's credit rating was cut to
Baa 3 from Baa 2 by Moody's on Thursday after the market close,
taking the company to the cusp of junk and sending its shares to
the bottom of the FTSE index in early trading Friday.
In currency markets Friday, the euro was broadly flat against
the U.S. dollar at $1.2648. Sterling was stable against a basket of
currencies too, ahead of the publication of third quarter U.K.
gross domestic product figures later in the morning.
The economy is expected to have expanded by 0.7%, which would be
a slowdown from the previous quarter but "comfortably above trend"
according to strategists at BNP Paribas.
In commodity markets, Brent crude was trading 0.7% lower on the
day at $86.25 per barrel, while gold edged 0.3% higher to $1,232.70
a troy ounce.