European stocks fall as bank shares flip lower after stress tests

European stocks fell on Monday, with bank shares losing steam following stress-test results for the industry, and as an update on eurozone manufacturing activity showed further slowing.

The Stoxx Europe 600 dropped 0.6% to close at 339.86, with banks leading decliners after stress-test results out on Friday.

Gains in bank shares ahead of the test results led to the Stoxx 600 closing up 0.7% on Friday.

Banks: The stress tests were aimed at showing how much capital, or cushion against losses, banks would have left on their balance sheets in a severe downturn. Italian, Irish and Spanish banks put in the worst performances of the 51 firms tested.

Banks that suffered hits to their capital buffers in the test scenarios included Italy’s UniCredit SpA, London-based Barclays PLC and German lender Deutsche Bank AG. UniCredit and Barclays opened higher but since flipped lower, losing 9.4% and 2%, respectively. Deutsche Bank shares also gave up gains, closing 1.8% lower.

Embattled Italian lender Banca Monte dei Paschi di Siena SpA ended up 0.6% even as its stress-test results fared the worst. But the bank’s board on Friday approved a plan to unload some of its nonperforming loans and raise fresh capital, moves aimed at fending off a government bailout.

Other movers: Shares of Heineken NV lost 3.7% after the brewer warned of a slowdown in Africa that could bite into future earnings.

Anglo American PLC rose 2.2% after a ratings upgrade to outperform from sector perform at RBC, according to Dow Jones Newswires.

Data: Meanwhile, Markit said its final eurozone manufacturing PMI for July came in at 52.0, down from a flash estimate of 51.9, and from June’s reading of 52.8.

Separately, Markit’s final reading of U.K. manufacturing activity in July deteriorated, falling to the lowest since early 2013, to 48.2. That is down from a flash estimate of 49.1.

Indexes: Italy’s FTSE MIB swung into the red, losing 1.7% to 16,554.83 and Spain’s IBEX 35 dropped 0.9% to 8,513.40.

Germany’s DAX 30 slipped 0.1% to 10,330.52 and France’s CAC 40 ended 0.7% lower at 4,409.17. The U.K.’s FTSE 100 dropped 0.5% to 6,693.95.

The euro was buying $1.1173, up from $1.1075 late Friday in New York.

Source: MarketWatch