European stocks dips to three-week low as Turkey dents lenders

LONDON (Reuters) - Banks dragged European shares down on Monday as the Turkish currency crisis shook investor confidence in lenders exposed to the country, while pharmaceuticals group Bayer sank 11 percent after its subsidiary Monsanto lost a key lawsuit.

A trader works at Frankfurt's stock exchange in Frankfurt, Germany February 6, 2018. REUTERS/Ralph Orlowski

The pan-European STOXX 600 .STOXX fell 0.2 percent and closed at a three-week low, with Germany's DAX .GDAXI down 0.4 percent as pharmaceuticals group Bayer weighed.

Bayer BAYGn.DE was the worst performer, sinking 10.8 percent after Monsanto, the U.S. agriculture giant it acquired in June, was ordered to pay damages in a lawsuit alleging its glyphosate weedkiller caused a man's cancer.

“With several other similar cases up for hearing, we expect this to be an overhang on the stock,” said Goldman Sachs analysts.

Bayer’s shares were set for their biggest one-day fall in more than nine years.

Euro zone bank stocks .SX7E fell 1.8 percent and touched levels not seen since December 2016 during trading.

Turkish-exposed banks BBVA BBVA.MC, Unicredit CRDI.MI, and BNP Paribas BNPP.PA fell 3.2 percent, 2.6 percent and 1.1 percent.

A growing economic crisis in Turkey took the lira to a new record low of 7.24 to the dollar overnight and has spurred selling across global markets, with some contagion to other emerging markets.

“The fears that all this will end in tears eventually are strong, more so with populist economic thinking at the helm, from the U.S. to Turkey, and the UK to Italy,” said Societe Generale analysts.

The lira pulled back from its record low after the central bank pledged to provide liquidity and cut lira and foreign currency reserve requirements for Turkish banks.

Deutsche Bank DBKGn.DE shares fell 2 percent after Bank of America Merrill Lynch downgraded the stock to "underperform". Ingenico INGC.PA shares also suffered a 1.7 percent fall after a BAML downgrade to "underperform".

Air France KLM AIRF.PA shares tumbled 4.1 percent after its biggest pilots' union said over the weekend further strikes were possible if pay talks with management did not resume.

Travel and leisure stocks .SXTP fell 0.5 percent as Air France weighed and the deepening crisis in Turkey sapped investors' appetite for companies involved in tourism in the country.

Shares in asset manager GAM GAMH.S fell 3.7 percent after it said it would liquidate nine funds whose trading it halted last month, after suspending the investment director who ran them.

Reporting by Helen Reid and Julien Ponthus; editing by Richard Balmforth and Andrew Roche