EUROPE MARKETS: Europe Stocks Slide Most Since July As Deutsche Bank Tumbles

By Carla Mozee, MarketWatch

Lanxess shares rally on M&A deal

European stocks slid Monday, with sharp losses for oil and gas shares and German lender Deutsche Bank AG pushing the market's benchmark to its biggest daily loss in 2 1/2 months.

The Stoxx Europe 600 dropped 1.6% to close at 340, marking its largest one-day percentage decline since early July, according to FactSet data. All sectors were lower, led by the financial , oil and gas, and consumer services groups.

Regional indexes suffered, with Germany's DAX 30 down 2.2% to 10,393.71, for its biggest one day slump since June 27.

In Frankfurt, Deutsche Bank (DBK.XE) (DBK.XE) shares sank 7.5% to an all-time closing low of EUR10.55 after Germany's Focus magazine reported over the weekend that German Chancellor Angela Merkel wouldn't support providing state aid for the country's largest lender (http://www.focus.de/magazin/kurzfassungen/focus-39-2016-kanzlerin-merkel-will-deutscher-bank-nicht-helfen_id_5977426.html). The German government dismissed the report (http://www.marketwatch.com/story/germany-dismisses-report-on-merkel-deutsche-bank-2016-09-26)on Monday.

"Financial markets have started the new trading week in a cautious mood with the prospect of the first [U.S.] presidential debate and key developments in the oil market set to drive sentiment," said Richard Perry, market analyst at Hantec Markets, in a note.

Read: Clinton-Trump debate showdown carries potential to sock stocks (http://www.marketwatch.com/story/clinton-trump-debate-showdown-carries-potential-to-sock-stocks-2016-09-24)

Members of the Organization of the Petroleum Exporting Countries and other major producers are meeting this week in Algiers (http://www.marketwatch.com/story/algeria-oil-minister-sees-hurdles-to-opec-russia-output-deal-2016-09-26) at the International Energy Forum. Investors will watch for any news that oil-producing countries will agree to curb oil output as the market deals with a long-running oil glut.

Investors have been questioning whether producers could actually work out a deal, leading to volatility in oil prices (http://www.marketwatch.com/story/oil-prices-attempt-a-rebound-as-hopes-rise-for-production-deal-2016-09-26) recently.

Among European energy production companies, France's Total SA (TOT)(TOT) fell 1.9%, Portugal's Galp Energia SGPS (GALP.LB) lost 1% and Spain's Repsol SA (REPYY) lost 1.2%. In the oil-field-services and equipment group, Italy's Saipem SpA (SPM.MI) gave up 4%.

The Stoxx Europe 600 Oil Index slumped 1.6%.

On Friday, Stoxx 600 fell by 0.7% (http://www.marketwatch.com/story/european-stocks-pull-back-from-2-week-high-after-mixed-pmis-2016-09-23), but still scored a weekly advance of 2.2%, the largest since mid-July.

Deutsche pushes back: Deutsche Bank's head of communications Joerg Eigendorf told CNBC on Monday (http://www.cnbc.com/2016/09/26/deutsche-bank-denies-that-ceo-john-cryan-has-asked-merkel-for-support.html) that Chief Executive John Cryan "at no moment of time" has asked Merkel for support in its negotiations with the U.S. The Justice Department this month proposed that the bank pay $14 billion to settle civil claims (http://www.marketwatch.com/story/deutsche-bank-rebuffs-14-billion-settlement-demand-in-us-mortgage-probe-2016-09-16) related to mortgage-backed securities.

While the company's share price may be low, that's not the bank's focus, he said. What's "really important to us is our credit story, which is very strong. It's fundamentally strong."

Movers: Specialty chemical company Lanxess AG (LXS.XE) jumped 8.1% after saying Sunday it's buying Chemtura Corp (http://www.marketwatch.com/story/lanxess-to-buy-chemtura-in-27-billion-chemical-company-merger-2016-09-25). (CHMT) in a deal with an enterprise value of around 2.4 billion euros ($2.7 billion).

UniCredit SpA (UCG.MI) was down 3.6% following a Reuters report (http://www.reuters.com/article/us-eurozone-banks-italy-unicredit-idUSKCN11W1J9) the Italian lender is aiming to raise between EUR15 billion to EUR16 billion through the sale of shares and assets.

Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) shares dropped 3.1% following a ratings downgrade to sell from neutral at Goldman Sachs.

Data: The Ifo German business sentiment index rose in September (http://www.marketwatch.com/story/german-business-sentiment-rebounds-sharply-ifo-2016-09-26), hitting its highest level since May 2014.

The euro extended gains after the report, buying $1.1273, up from $1.1224 late Friday.

The euro also moved firmly higher against the pound (http://www.marketwatch.com/story/pound-fall-to-5-week-low-against-euro-as-hard-brexit-fears-intensify-2016-09-26) heightened fears that the U.K. government is heading for a so-called hard Brexit that would take the country off the single market. Sterling slumped to a five-week low against the shared currency at an intraday low of EUR1.1472.

Elsewhere, European Central Bank President Mario Draghi said Monday afternoon at the European Parliament that the low interest-rate environment carries risks for the region that need to be closely monitored. As well, there has been less momentum in recovery in the euro-area, he said.

Indexes: France's CAC 40 fell 1.8% to 4,407.85 and Italy's FTSE MIB declined 1.6% to 16,192.48. The U.K's FTSE 100 fell 1.3% to 6,818.04 (http://www.marketwatch.com/story/ftse-100-slumps-more-than-1-with-oil-shares-in-the-red-2016-09-26).

Spain's IBEX 30 lost 1.3% to 8,711.40. Read:Spain's regional elections a boost for acting Prime Minister Mariano Rajoy (http://www.marketwatch.com/story/spains-regional-elections-a-boost-for-acting-prime-minister-mariano-rajoy-2016-09-26)

U.S. debate: Turning back to politics, the first U.S. presidential debate between Democratic nominee Hillary Clinton and Republican nominee Donald Trump will begin at 9 p.m. Eastern Time, or 2 a.m. London time Tuesday morning.

"With the September FOMC meeting out of the way traders will turn focus towards who will be the next [U.S.] president. With the candidates seemingly running on equal footing in the polls, the live debates could be the swing factor as to whether Trump or Clinton claim the White House," said Hantec Market's Perry.

"So these debates will be volatility factors for traders and the first is in New York tonight."

(END) Dow Jones Newswires

September 26, 2016 12:07 ET (16:07 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.