Morgan Stanley (MS) and JPMorgan Chase (JPM) added more fuel to the sell-off in back stocks Tuesday after political turmoil in Italy and Spain raised fresh fears about fracturing in the eurozone.
JPMorgan said Tuesday that second-quarter trading revenue so far is about flat from a year ago. That follows a rebound in Q1, when a surge of volatility rocked markets to end a year-long period of tepidness.
Meanwhile, Morgan Stanley warned that its wealth management division, which brings in about half of the company’s revenue, saw activity slow in March and stay slow in April and May, while also noting low pricing on fee-based accounts.
Bank stocks tanked broadly, with S&P financials at their lower level since March 23. Morgan Stanley closed down 5.75% in the stock market today and rival Goldman Sachs (GS) fell 3.4%. JPMorgan tumbled 4.3%, below its 50-day line, as it works on a flat base with a 119.43 buy point. Citigroup (C) and Bank of America (BAC) fell 4%.
Banco Santander (SAN), based in Spain, sank 9%. The stock’s 50-day line crossed below its 200-day line last month, a bearish signal. Germany-based Deutsche Bank (DB), which already plans to cut thousands of jobs, lost 6.2%. Swiss giants UBS (UBS) and Credit Suisse (CS) sold off 4.2% and 6.3%, respectively.
In the U.K., Barclays (BCS) slid 5.2%, Lloyds Banking Group (LYG) was down 4%, and HSBC (HSBC) fell 2%.
Italy’s Populists Spark Rout In Bank Stocks
The drama in Italy comes after the populist Five Star Movement party and the far-right League toppled establishment parties in March’s elections.
On Sunday, Italian President Sergio Mattarella vetoed the appointment of a populist-backed finance minister who supported leaving the euro. Mattarella chose Carlo Cottarelli, a former economist at the International Monetary Fund who supports the eurozone, as prime minister-designate. Cottarelli will be tasked with forming a temporary government. The moves derailed efforts by the Five Star Movement and the League to form a coalition.
“As a result, the prospects of a quick return to the polls just 12 weeks after latest elections, look increasingly likely,” Fawad Razaqzada, a market analyst at Forex.com, said in an email. “Investors don’t like increased uncertainty, not when there is increased risk of a country leaving the euro.”
Italy’s economy has remained weak for years, and is struggling to contain its debt in the wake of the financial crisis a decade ago. Those conditions have stoked anti-establishment, anti-euro sentiment.
In Spain, parliament is preparing to vote on Friday over whether Prime Minister Mariano Rajoy should keep his job in the wake of a corruption scandal that has ensnared his center-right People’s Party.