European stocks fell on Thursday after the European Central Bank abruptly cancelled its acceptance of Greek bonds in return for funding, shifting the burden onto the country’s central bank.
Greek banking shares sank, with the Athens Stock Exchange FTSE Banks Index dropping 14 per cent, driving Greece’s broader ATG equity index down by 5.6 per cent.
Alpha Bank shares were down by 10 per cent and Eurobank shares plunged 14.6 per cent. Shares in National Bank of Greece fell 12.3 per cent.
“The ECB took the market by surprise,’’ one Athens-based trader said.
“Given the turn of events and the fact that Greek banks had rallied over 50 per cent in the last five sessions, it was a trigger for profit-taking.’’
The ECB’s move, which means the Greek central bank will have to provide its banks with tens of billions of euros of additional emergency liquidity in the coming weeks, was a response to what many in Frankfurt see as the Greek government’s abandoning of its aid-for-reform programme.
By 0857 GMT, the FTSEurofirst 300 index of top European shares was down 0.4 per cent at 1,481.86 points.
Southern European markets were among the most affected by the ECB move, with Italy’s MIB index down 1.3 per cent and Spain’s IBEX down 1.1 per cent.
“Despite all the wishful thinking in Athens, the ECB has decided to use its veto. It’s up to the Greek government now, and solutions have be found very quickly,’’ Mirabaud Securities senior equity sales trader, John Plassard, said.
On the earnings front, BNP Paribas said cost cuts increased to cover growing compliance and control expenses, sending shares in France’s biggest bank down 3.7 per cent.
Bucking the trend, shares in French drugs firm Sanofi rose 2.4 per cent after saying it will name a new chief executive in the coming weeks, and predicting that euro weakness could boost profits this year.
Shares in Finnish tyre maker Nokian Renkaat, which has a major exposure to Russia, jumped 9.8 per cent after it kept its dividend unchanged at €1.45 euros per share. The market had expected a cut in its payout.
Sweden’s Securitas rose 8 per cent after posting a bigger-than-expected rise in fourth-quarter core profit and said it had now fully offset a staff cost increase stemming from US healthcare reforms.