Europe's Stoxx 600 posts biggest drop in three weeks as banks tumble and oil climbs

Europe's Stoxx 600 stock index saw its largest drop in three weeks on Thursday, October 22, as banks struggled and oil prices rose, dampening investors' appetite for risk. The pan-European index closed over 1% lower at 637.74 points. Banking shares led the decline, with the eurozone banking index falling 4.2%, its weakest day since March.

Spain's Bankinter plummeted 7.6% after reporting results showing increased deposit costs and squeezed margins due to higher interest rates. Barclays also fell 2.3% following a profit that fell short of expectations, announcing plans to cut 5,000 jobs in 2026. Despite generally solid earnings, investor sentiment was shaken by disappointing results and economic uncertainty.

Joost van Leenders, an investment strategist, noted the impact of the Middle East conflict on Brent crude prices, which reached a five-month high. The widening spread between French bonds and German Bunds also added to market concerns due to political uncertainty in France. Hermes, a luxury goods company, dropped 5% after reporting slightly weaker-than-expected quarterly revenue.

Nestle gained 1.1% after reporting better-than-expected organic sales growth. Healthcare stocks were the biggest gainers, up 2.1%, with Belgian biopharmaceutical UCB rising 21.6% after raising its revenue forecast for 2026. The tech index fell 2%, tracking a global sell-off, and AI-related shares like Infineon, STMicroelectronics, and ASML dropped between 5% and 6%.

Meta Platforms' AI-related shares also faced pressure despite solid earnings, reigniting concerns about the sustainability and profitability of AI spending.