Bank worries stalk Europe

Heading into the close, the FTSE 100 is 10 points lower, hurt by worries about Italian banks, while oil prices fall on news of bigger US stockpiles.

-       Italian banks feel the heat again
-       Still no joy on Dow 20K
-       Crude lower after US inventory data

Banking concerns have played across European markets once again today, as Monte dei Paschi looks set for a government takeover. The rescue plan has fallen apart, with Rome unable to find an anchor investor; for understandable reasons, no one wants to be first ‘over the top’ should the crisis worsen. Italy’s debt will get bigger, but a major government stake should, paradoxically, boost risk appetite among investors, who will be glad to see the Italian government taking the tough decisions. Meanwhile, Spanish banks are under pressure after the ECJ ruled they would have to pay back funds to mortgage borrowers. 2016 saw plenty of concerns about European banks, but while it made sense for everyone to buy Deutsche shares at €10, it will be harder to find investors willing to take stakes in southern European firms. Still, the overall tone on markets is only slightly negative, although the patient watch for Dow 20,000 goes on.

WTI is giving up most of its gains after US crude stockpiles rose in the preceding week. With the OPEC meeting out of the way, the focus remains firmly on what American oil producers will do, and for the moment they are doing the logical thing – increasing production to take advantage of higher prices. Should this continue, it will mean more pain for OPEC and a need for further output cuts.