By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets erased earlier
gains on Monday after data showed German business confidence has
fallen to a 22-month low.
Markets had opened firmly higher after the European Central Bank
and the European Banking Authority said most of the region's
lenders passed their stress tests.
Ifo data: Data from the Ifo Institute showed business confidence
in Germany fell to a 22-month low in October, down to 103.2 points
from 104.7 points in the previous month. The figure was also below
analysts' expectations of 104.5, in a poll by The Wall Street
Journal last week.
"The outlook for the German economy deteriorated once again,"
the institute said in the release.
Bank stress tests: Twenty-five banks flunked the European
Central Bank's stress tests that were released on Sunday, as they
face a capital shortfall of 24.6 billion euros ($31.2 billion).
However, 13 of those lenders have already taken steps to beef up
their capital buffers.
Shares of Commerzbank rose 2.8%, one of the biggest gains in the
Stoxx Europe 600 index . Banco Popular Español SA rose 1.1%,
Deutsche Bank AG (DB) climbed 0.3%, and UniCredit SpA added 0.1%.
All those banks were among the lenders that passed the ECB's stress
tests, an indication the central bank believes they are strong
enough to weather a financial storm.
British banks were not subject to the ECB's stress test, but
were instead assessed by the European Banking Authority. All four
U.K. banks in the test were given a green light, although Lloyds
Banking Group PLC (LYG) only narrowly passed. Lloyds shares were
down 2.2% in London.
Market reaction: The Stoxx Europe 600 index fell 0.6% to 325.34,
after trading as high as 330.06 earlier in the day.
Germany's DAX 30 index dropped 0.7% to 8,927.81, while France's
CAC 40 index lost 0.6% to 4,102.06. The U.K.'s FTSE 100 index
slipped 0.4% to 6,361.80.
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