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StockBeat: Markets Rise but Banks Fall as ECB Plays Down 'Tiering' Hopes

By Geoffrey Smith

Investing.com -- What the ECB giveth, the ECB taketh away.

Bank stocks had outperformed on Wednesday after traders jumped on comments by European Central Bank President Mario Draghi suggesting that the ECB would do something to offset the losses that they make on the billions of euros they hold in reserves at the central bank.

But they’re retreating today after the ECB’s chief economist Peter Praet walked back those comments in an interview, saying there would have to be a “monetary policy case” for 'tiering' the rates on excess deposits.

It’s an arcane debate, but one worth paying attention to, because the weakness of the euro zone’s banks is an obvious risk to the broader economy, if the global slowdown persists and triggers another rise in bad loans across the region. And as the Deutsche Bank-Commerzbank merger plans show, it's not like there is an abundance of other bright ideas out there for saving a sector riddled with zombies.

At 04:00 AM ET (0900 GMT), the benchmark Euro Stoxx 600 was up 1.32 points, or 0.4% at 378.60. It’s now up 12.0% for the year, while the Euro Stoxx banks sectoral index is up only 2.7%, the worst performing of all the major sectors.

Germany’s Dax was up 0.4%, while the U.K. FTSE 100 was up 0.7%, sauced by another dip in sterling after Wednesday's inconclusive Brexit votes.

Of course, Europe’s banking problems don’t end with the ECB. Swedbank (ST:SWEDa) is among the worst performing bank in Europe this morning, down 3.8% as three major shareholders withhold their support from CEO Birgitte Bonnesen over a widening money-laundering scandal. According to the Financial Times, U.S. authorities are now investigating the bank for whether it lied to them about the extent of its involvement in money-laundering documented by the so-called ‘Panama Papers’ leak.

Elsewhere, German chemicals giant Bayer (DE:BAYGN) is down another 1.4% after a U.S. jury said it must pay $80 million to a man for causing his cancer with its weedkiller Roundup. The company faces over 10,000 similar cases but continues to dispute the science behind the ruling.

Fiat Chrysler (MI:FCHA) is down 1.0% as takeover speculation cools after Volkswagen (DE:VOWG_p) reportedly ruled out any form of combination with it.

On the bright side, British American Tobacco (LON:BATS) and Imperial Brands (LON:IMB) are higher after a tobacco sector upgrade from Citigroup (NYSE:C), according to Bloomberg, while luxury names such as Kering (PA:PRTP) and Burberry (LON:BRBY) continue to attract bids, being seen as relatively immune to an economic slowdown.

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