Banking stocks tumble after Italy imposes shock windfall tax

Global stocks skidded and the dollar jumped on Tuesday after Moody’s cut the credit ratings of 10 small to midsized US banks.

Dublin

The Irish banks were hit badly after Italy dealt a surprise blow to its financial sector and sent shock waves across Europe by setting a one-off 40 per cent tax on profits reaped from higher interest rates.

Bank of Ireland was down 4.7 per cent; AIB traded down 2.6 per cent; while Permanent TSB fell 3.6 per cent.

“The Italy move put a spotlight on the Irish banks because of how well they have been doing and the profits they have been making lately, and there was some speculation as to whether they could be subject to a similar tax,” one trader said.

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“We think the structure here is very different, but the overall macro picture dragged the sector down,” she added.

The banks were the main factor in dragging Euronext Dublin down 1 per cent by close of business.

Among the food names, Kerry Group finished the day down 1.5 per cent, which was “probably not a bad result”, a trader said, given its peer International Flavours and Fragrances in the US plummeted double-digit figures on Monday and Tuesday.

Among the bigger hitters, building materials giant CRH was down 0.44 per cent. There was more activity in the stock after the US market opened ahead of its listing there at the end of September. “Interest there is slowly but surely ramping up,” noted a trader.

Elsewhere box-maker Smurfit Kappa and Paddy Power Betfair parent Flutter Entertainment were both down 1 per cent at close of business.

London

Banks and commodity stocks led the fallers as London’s top markets closed 0.36 per cent lower.

Abrdn was the FTSE 100′s heaviest faller as the asset-management firm reported shrinking assets and a drop in profits for its investment division.

It recorded a 16 per cent jump in net outflows as more people moved money out of funds and investments with Abrdn. Shares in the firm were down 25.5p to 193p at the end of trading.

Shares in InterContinental Hotels Group gained on the back of higher sales as it told shareholders there had been “no signs” of people cutting back on leisure trips. It finished the day up 132p at 5,790p.

Glencore dropped in value after its profits were cut in half due to easing commodity prices.

The mining and trading firm had been boosted last year by the higher prices for coal and other commodities following the invasion of Ukraine but has now seen these gains ebb away. Glencore shares were down 12.1p at 444.6p.

Europe

Following the news from Italy, the euro-zone bank index fell 3.78 per cent and was on track for its biggest daily fall since the financial turmoil of March.

MSCI’s gauge of stocks across the globe shed 1.13 per cent, while the pan-regional Stoxx 600 index in Europe lost 0.31 per cent.

Germany’s Dax index was 1.1 per cent lower for the day and the Cac 40 closed down 0.69 per cent.

New York

Wall Street tumbled in a broad sell-off led by financial stocks after Moody’s downgraded several US banks, though drugmakers rose on Eli Lilly’s strong results and positive data from Novo Nordisk’s obesity treatment.

Big banks Goldman Sachs and Bank of America eased 2.9 per cent and 3.2 per cent, respectively, while Bank of New York Mellon and US Bancorp shed 2.4 per cent and 2.5 per cent.

After the S&P 500 and Nasdaq logged their worst week since March, Wall Street had rallied on Monday as investors built positions ahead of Thursday’s highly awaited US inflation report.

At 11.35am eastern time, the Dow Jones Industrial Average was down 0.98 per cent; the S&P 500 was down 1.03 per cent; and the Nasdaq Composite was down 1.41 per cent. – Additional reporting: agencies