European stocks hit three-week low as Turkey stress dents lenders

Banks dragged European shares down on Monday as a growing economic crisis in Turkey shook investor confidence in lenders exposed to the country, while pharmaceuticals group Bayer sank 11 percent after its subsidiary Monsanto lost a key lawsuit. The pan-European STOXX 600 fell 0.3 percent to 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. Euro zone bank stocks .SX7E tumbled 1.3 percent to a six-week low as Turkey-exposed banks BBVA (BBVA.MC), Unicredit (CRDI.MI) and BNP Paribas (BNPP.PA) fell 0.9 to 2.6 percent.

“Should rates be increased by 10 percent with a stabilization of EUR/TRY at 7, we would still see some earnings downside of 10% for BBVA and 8% for UCG,” said JP Morgan analysts, cutting their earnings estimates for the exposed banks. A growing economic crisis in Turkey which took the lira to a new record low of 7.24 to the dollar overnight has spurred selling across global markets with some contagion to other emerging markets. 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.