European shares fell on Friday as a dramatic fall in the Turkish lira jolted markets, with banks such as Spain’s BBVA SA and Italy’s UniCredit SpA hit by worries over their exposure to Turkey.
The pan-European STOXX 600 closed down 1.1, losing 0.9 percent on the week, as investors fretted about the political and economic repercussions of the Turkish crisis.
The Turkish lira fell to record lows as concerns over a widening rift with the US persisted after a Turkish delegation returned from talks in Washington with no apparent solutions.
“As the talks ... have broken down for the time being, no relief is to be expected,” BayernLB analyst Norbert Wuthe said.
“At the same time, the new US sanctions against Russia have unleashed concern in the German economy,” he added.
Germany’s exporter-heavy DAX fell 2 percent, underperforming the broader market, while Milan was the hardest-hit major European index and lost 2.5 percent, its lowest level since July last year.
Banks were among the biggest fallers after the Financial Times reported that the European Central Bank is concerned about the exposure of some of the eurozone’s biggest lenders to Turkey in light of the currency fall.
Shares in France’s BNP Paribas SA, Italy’s UniCredit and Spain’s BBVA fell 3 percent, 4.7 percent and 5.1 percent respectively.
Turkey contributed 14 percent to BBVA’s first-half group profit and 9 percent to UniCredit’s consolidated profit, although their capital exposure is limited, Jefferies Group LLC analysts said.
Both banks have said a 10 percent fall in the lira could shave 2 basis points off their capital adequacy ratio.
Elsewhere, a profit warning from K+S AG sent shares in the German potash miner tumbling 7.2 percent, to the bottom of the STOXX 600.
Another big loser was the tech sector, which was down 1.5 percent with chipmakers at the sharp end of selling.
STMicroelectronics NV, Siltronic AG, Infineon Technologies AG and AMS AG lost 5.1 percent, 6.3 percent, 2.8 percent and 3.9 percent as negative sentiment pervaded semiconductors after disappointing results from US chipmaker Microchip Technology Inc, a bellwether for the industry.
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