UKX FTSE 100 Index

By Carla Mozee, MarketWatch

Deutsche Bank, Santander shares fall after U.S. stress test

European stocks edged down Thursday, with Deutsche Bank AG and Banco Santander SA shares under pressure, a day after equities rallied as Brexit-related worries appeared to ebb.

The Stoxx Europe 600 slipped 0.1% to 326.09. Health care, financial and telecommunications shares were lower, but gains for basic materials, technology and industrial shares limited the overall decline.

European stocks on Wednesday surged 3.1% (http://www.marketwatch.com/story/european-stocks-rise-again-as-risk-appetite-returns-after-brexit-vote-2016-06-29), marking a second straight day of sharp gains after a two-session rout in the wake of the U.K.'s vote to leave the European Union.

The pan-European index was still on course for a monthly loss of 6.2%, which would be the worst monthly performance since January.

Investors on Thursday will keep tabs on the jockeying among Conservative Party members who are seeking to become the new leader of the party and replace Prime Minister David Cameron. Cameron, who wanted the U.K. to stay in the EU, last week said he's resigning.

At 4 p.m. London time, or 11 a.m. Eastern Time, Bank of England Governor Mark Carney will deliver a monetary policy update in wake of the Brexit vote.

Banks: Shares of German lender Deutsche Bank AG (DBK.XE) and Spain's Banco Santander (SAN) fell 3.7% and 2.4%, respectively. The U.S. arm of Santander and parts of Deutsche Bank failed the Federal Reserve's stress test (http://www.marketwatch.com/story/most-banks-get-fed-clearance-to-lift-dividends-and-stock-buybacks-2016-06-29)of financial institutions on what were called "qualitative" concerns.

The Fed said it found "broad and substantial weaknesses across their capital planning processes, and insufficient progress these firms have made toward correcting those weaknesses and meeting supervisory expectations."

Deutsche Bank didn't pass the Fed test last year, and Santander has failed for the two years prior, though the central bank did say both had made progress.

Separately, the International Monetary Fund said Thursday that Deutsche Bank is the riskiest financial institution in the world as a potential source of external shocks to the financial system (http://www.marketwatch.com/story/deutsche-bank-poses-greatest-risk-to-system-imf-2016-06-30).

Indexes: Germany's DAX 30 gained 0.1% to 9,619.89, and France's CAC 40 rose 0.2% to 4,203.64.

Italy's FTSE MIB fell 1.2% to 15,749.24, while Spain's IBEX 35 lost 0.5% to 8,066.40.

The U.K's FTSE 100 shed 0.2% to 6,349.91 (http://www.marketwatch.com/story/ftse-100-eases-back-after-returning-to-pre-brexit-level-2016-06-30). The index on Wednesday erased the losses it suffered after the Brexit vote.

In currencies, the euro fetched $1.1119, compared with $1.1106 late Wednesday. The pound was buying $1.3466 after changing hands at $1.3436 late Wednesday in New York.

(END) Dow Jones Newswires

June 30, 2016 05:07 ET (09:07 GMT)

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