European bank stocks are on track for their biggest two-day decline since March, driven by renewed concerns over France’s fiscal deficit and political instability. The Stoxx 600 banks sector fell as much as 2.2% on Thursday, following a 3.3% drop on Wednesday, erasing nearly half of the sector’s 2026 gains. Societe Generale SA has fallen 25% from its August peak, while Deutsche Bank AG is down 18% from last month’s high.
Investors are shunning French bonds, pushing the yield premium over German bunds to the highest since 2011. French Finance Minister Roland Lescure stated there remains investor demand for government debt and no change in issuance strategy. Analysts attribute the volatility to macroeconomic uncertainty, particularly around growth, yields, and the European Central Bank’s next move.
Despite the sell-off, European banks still outperform US peers and broader regional benchmarks this year, though the sector’s 14-day relative strength index is nearing oversold territory.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing