European bank stocks resumed their selloff on Wednesday, tumbling over 5% as political instability in France triggered a bond market selloff. The Euro Stoxx Banks Index dropped 4%, heading toward its lowest close in three months. Major lenders including Societe Generale SA, Deutsche Bank AG, BNP Paribas SA, Credit Agricole SA, and Uni Credit SpA all declined.
The sector's pullback follows recent European market selloffs amid fears of government collapse and deficit concerns in France. Investors dumped French bonds, widening the spread between French and German 10-year yields to about 140 basis points. Strategists at JPMorgan viewed the pullback as a sentiment-driven de-risking opportunity rather than a fundamentals-driven downturn, citing yields unlikely to rise substantially more.
Despite the retreat, the bank group remains up 12% year-to-date. The direct balance sheet impacts from widening sovereign spreads are viewed as limited, though second-order effects on deposit mix and asset quality remain a concern due to spread persistence.
Source: Bloomberg Markets · Summarized by HeadlinesBriefing