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Bank Stocks Slide Following New Italian Tax and Weak Chinese Economic Data

U.S. bank stocks slipped lower on Tuesday morning as markets digested Italy’s decision to implement a new tax on banks as well as weak economic data coming out of China.

Italy’s government decided to introduce a 40% tax on “extra” bank profits, igniting fears that other financially stretched European governments could decide to implement similar measures as a means of recovering cash.

UniCredit SpA and Intesa Sanpaolo SpA both slumped by more than 5% following the announcement, thereby bringing the Stoxx Europe 600 index down by 0.3% at 9:50 a.m. London time. Futures on the S&P 500 index were down 0.3% while those on the Sow Jones Industrial Average and the Nasdaq 100 fell 0.2% and 0.4% respectively.

“This news is a strong headwind for the banking sector which is an important component of European indexes.” Rajeev De Mello, a global macro portfolio manager at Gama Asset Management SA said of the new Italian tax.” Such actions increase the risk that other cash-strapped European governments seek similar or other ways to raise fiscal revenues from their banks.”

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