EUROPE MARKETS: European Stocks Drop To 4-month Low As Brexit Fallout Continues

By Sara Sjolin, MarketWatch

European banking index slides to lowest since Nov. 2011

European stock markets suffered another rout territory as the historic Brexit referendum last week continued to cast a shadow over global financial markets.

The Stoxx Europe 600 index lost 4.1% to 308.75, closing at its lowest since mid-February.

Monday's loss followed a 7% slide on Friday (http://www.marketwatch.com/story/european-stocks-face-worst-day-since-1987-as-uk-votes-to-ditch-the-eu-2016-06-24), when the pan-European benchmark posted its worst session since October 2008--in the wake of the Lehman Brothers bankruptcy--after the U.K. voted to leave the European Union (http://www.marketwatch.com/story/brexit-is-reality-uk-media-says-2016-06-24).

"Uncertainties following the U.K.'s decision to leave the European Union with last week's referendum will continue to be a source of volatility for global equities, and global equity indices could drop to far lower levels in the coming weeks," analysts at Société Générale said in a note.

The U.K.'s FTSE 100 index slid 2.6% to 5,982.20 on Monday (http://www.marketwatch.com/story/ftse-100-slides-as-brexit-continues-to-spook-traders-2016-06-27), with the banks posting some of the biggest losses. Traders also continued to dump the pound , sending sterling down to a fresh 31-year low at $1.3121, from $1.3676 late Friday in New York. The currency had momentarily steadied Monday morning after U.K. finance minister George Osborne stressed the country is strong enough to deal with the coming challenges (http://www.marketwatch.com/story/uks-osborne-tries-to-calm-markets-with-post-brexit-speech-2016-06-27).

Read: Why FTSE 100 is suffering less than its European counterparts after Brexit (http://www.marketwatch.com/story/why-ftse-100-is-suffering-less-than-its-european-counterparts-after-brexit-2016-06-24)

The pound briefly traded below $1.32 on Monday--the lowest since 1985.

The unexpected referendum result also sent shock waves through the U.K. parliament, leaving the two biggest political parties in turmoil. British Prime Minister David Cameron said Friday morning he'll resign (http://www.marketwatch.com/story/uk-prime-minister-david-cameron-resigns-after-brexit-vote-2016-06-24), while leader of the opposition Labour Party Jeremy Corbyn over the weekend sacked a key member of his cabinet seen as plotting a coup against him. On Sunday, that dismissal was followed by the resignations of 11 other key party members in a protest against Corbyn's leadership. More resignations followed on Monday.

Read:5 charts that show how Brexit backlash continues to thrash the markets (http://www.marketwatch.com/story/5-charts-that-show-how-brexit-backlash-continues-to-thrash-the-markets-2016-06-27)

The Brexit vote has further raised new questions about the future of the EU. Euroskeptic parties on the rise in other member states--such as Denmark, Sweden, Holland and Italy--are now calling for their own referendum, which could see the union face more uncertainty in coming years.

Spanish election: However, Spain was seen as providing a glimmer of hope on Monday. The conservative People's Party of acting Prime Minister Mariano Rajoy won the most seats in the country's parliamentary election (http://www.marketwatch.com/story/conservative-spanish-prime-ministers-party-appears-ahead-in-national-selections-2016-06-26) on Sunday. Analysts said a "flight to safety" following the U.K.'s Brexit vote had helped traditional parties gain seats.

However, with Rajoy's party short of a majority, Spain could face further political deadlock as he attempts to form a coalition government.

The IBEX 35 index opened with gains, but ended lower with the rest of Europe, down 1.8% at 7,645.50.

Other indexes: Germany's DAX 30 index fell 3% to 9,268.66, while France's CAC 40 index also dropped 3% to 3,984.72.

The euro fell to $1.1013, down from $1.1117 late on Friday.

U.S. stocks also traded with sharp losses on Wall Street (http://www.marketwatch.com/story/us-stocks-set-for-losses-as-brexit-backlash-continues-2016-06-27).

Read:S&P 500 could drop as much as 7% in Brexit swoon (http://www.marketwatch.com/story/brexit-sparked-volatility-will-continue-to-weigh-on-us-stock-market-2016-06-25)

Movers and shakers: Shares of EasyJet PLC (EZJ.LN) (EZJ.LN) slumped 22% after the budget airliner issued a profit warning (http://www.marketwatch.com/story/easyjet-warns-on-profit-citing-brexit-uncertainty-2016-06-27), saying the economic and consumer uncertainty in the aftermath of the referendum is likely to hit revenue.

U.K. banks, which at one point suffered losses around 30% on Friday morning, continued to fall on Monday. Royal Bank of Scotland Group PLC (RBS.LN) (RBS.LN) dropped 15%, Barclays PLC (BCS) (BCS) fell 17%, and Lloyds Banking Group PLC (LLOY.LN) (LLOY.LN) lost 10%.

Banks outside the U.K. also slumped on Monday, with shares of Credit Suisse Group AG (CSGN.EB) (CSGN.EB) off 9.2%, Deutsche Bank AG (DBK.XE) (DBK.XE) down 6.2% and Société Générale SA (GLE.FR) 8.4% lower.

The Stoxx Europe 600 banks index plunged 7.7%, closing at its lowest level since Nov. 2011.

(END) Dow Jones Newswires

June 27, 2016 12:04 ET (16:04 GMT)

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