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Milan stocks end lower as banking shares remain under stress

by Flavia Carletti

European stock prices closed lower on Tuesday, extending Monday’s losses, amid heightened concerns over US President Donald Trump’s protectionist and immigration policies. After initially driving indices to new highs with promises of fiscal stimulus and deregulation, Trump's latest remarks against trade partners like China and Mexico and the recent immigration restrictions have fueled nervousness.

On Tuesday night, Trump fired US Acting Attorney General Sally Yates after she publicly questioned the legality of Trump’s executive order on immigration, instructing Justice Department attorneys not to defend it in court.

On the macroeconomic front, Italy’s unemployment rate in December was steady at 12% with the number of unemployed persons rising 0.3% from November as the number of female jobless workers rose while male unemployment fell, according to data released by national statistical office ISTAT.

The London FTSE 100 closed down 0.27% at 7,099.15 points, the Frankfurt DAX dipped 1.25% to 11,535.31 points, the Paris CAC 40 lost 0.75% at 4,748.90 points, in Milan the FTSE MIB dropped 0.90% at 18,590.73 points and in Madrid the IBEX 35 ended down 0.22% at 9,341.00 points.

Among stocks, shares in UniCredit dropped 3.97% after the group warned that it expects to record a loss of approximately €11.8 billion in 2016 after taking additional negative one-off items for a total of €1 billion that are on top the €12.2 billion already announced in December. Today the lender’s board will meet to set the price of its €13 billion capital increase.

The lender said on Monday night that most of the additional charges are due to a higher write-down of the investment in the Atlante Fund, on some participations and deferred tax assets for temporary differences and extraordinary contributions to the National Resolution Fund. UniCredit also confirmed its financial targets up to 2019. In particular, the CET1 ratio target in 2019 is confirmed to be above 12.5%.

Shares of Italian lender Intesa Sanpaolo ended down 1.27% as investors continue to await news on a possible bid for Italian insurer Generali. Intesa share price are losing ground even though Credit Suisse has come out with an ’outperform’ recommendation on the stock, setting a target price of €2.85.

Credit Suisse analysts believe that a deal with Generali would allow Intesa to diversify both its business and its geographical presence while creating an asset management powerhouse. Its banking activities, including bad loans, would be less important should it combine with Generali, they note.

Finally shares in Italian aerospace and defense group Leonardo-Finmeccanica dropped 2.30% after an Italian court sentenced Chief Executive Mauro Moretti over a train disaster occurred when he was heading the state railways company FS. Moretti and Michele Mario Elia, the former CEO of railways services company RFI, were both sentenced to seven years over the case. The defendants can appeal against the ruling.

Prosecutors said the top management was responsible for a series of mistakes and negligence that eventually led to the fatal derailment and explosion of a cargo train hauling liquefied gas in the Tuscan town of Viareggio, in which 32 people died.