European stocks dip as Italian banks, downbeat data weigh

Hang Seng and Shenzhen Component Index in Asia were down 1.81pc and 0.42pc respectively

MILAN (Web Desk/Reuters) – European shares dropped after trading began on Tuesday, as Italian banks came under pressure after the cabinet approved a 40 per cent windfall tax on lenders, while sticky inflation print from Germany and weak China trade data further dented risk sentiment.

By 08:43 GMT, the Pan-European STOXX 600 index was down 0.39 per cent.

Read more: Dollar gains ground; Aussie, yuan slip after weak China trade data

Earlier in the day, Hang Seng in Hong Kong was down 1.81pc while Shenzhen Component Index dipped 0.42pc followed by South Korea’s Kospi 0.26pc and Taiwan’s benchmark index 0.7pc.

However, Nikkei gained 0.38pc with Australia’s ASX200 remained mostly flat with a marginal 0.03pc.

Italian banks such as Intesa Sanpaolo and UniCredit fell more than 5pc after Deputy Prime Minister Matteo Salvini said the 40pc levy on banks' extra profits will feed items such as a reduction of the tax wedge, tax cuts and financial support to holders of mortgages on first homes.

Italy's banking-heavy FTSE MIB at one point slid 2.13pc but later reduced the losses to 1.59 [by the time this report was filed], while European banks dropped 1.8pc after ratings agency Moody's cut credit ratings of several small- to mid-sized US banks and said it may downgrade some of the biggest lenders in the United States.

Germany's DAX index fell 0.5pc after data showed inflation eased to 6.5pc in July, but was in line with economist expectations.

China-exposed miners and automakers fell after data revealed imports and exports in the world's second-largest economy fell much faster than expected in July, threatening growth prospects and heightening pressure on Beijing to provide fresh stimulus.

Read more: China's trade slumps, threatening recovery prospects

Shares of Glencore slumped nearly 3pc after the global miner said its earnings had halved in the first half.

WINDFALL TAX

Italy's cabinet on Monday approved the 40pc windfall tax on banks for 2023, with proceedings to be used to help mortgage holders and cut taxes, the deputy prime minister said.

"One only has to look at the banks' first-half 2023 profits, also the result of the European Central Bank's rate hikes, to realise that we are not talking about a few millions, but we are talking one can assume of billions," Deputy Prime Minister and Infrastructure Minister Matteo Salvini told a news conference in Rome.

"If (it is true that) the cost of money burden for households and businesses has increased and doubled, it has not equally doubled what is given to current account holders" Salvini said, adding there was a large gap between the rates applied to loans and deposits.

Salvini said the 40pc levy on banks' extra profits that amount to several billion euros will feed items such as a reduction of the tax wedge, tax cuts and financial support to holders of mortgages on first homes.

Reuters was the first to report in April that the Treasury was working on a levy on its banks to fund relief measures for families struggling with an increase in the cost of living.

The economy minister denied such plans in June but flagged lenders needed to show sufficient flexibility on interest rates charged and paid on customers' loans and deposits.

The Italian government, including Prime Minister Giorgia Meloni, repeatedly criticised the ECB over repeated interest rate hikes.