Financials Down On Growth, U.K. Election Concerns - Financials Roundup

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Banks, lenders and other financial companies declined amid fears about growth and the U.K. election. The yield on the 10-year Treasury hit a seven-month low, hinting that bond traders are skeptical about the outlook for the U.S. economy. "With the yield curve flattening to its lowest point since the election, financials are one group that are rather beaten up," said Ryan Detrick, senior investment strategist at brokerage LPL Financial. "Earnings have been great, but in the end what the Fed does and says about interest rates will continue to move this group." The low bond yields -- and what they say about economic prospects -- could hurt bank earnings. "If the bond markets are right and growth slows, then we think earnings growth would likely return to the path seen in recent years, i.e. barely above zero," said analysts at brokerage Bank of America Merrill Lynch Global Research, in a note to clients. "If we fade earnings growth back to zero in 2018/19 and keep markets on current 2018 multiples, we find 13% downside potential for equity markets." Shares of U.K. companies, including banks Barclays and Royal Bank of Scotland, fell sharply as polls were divided on the likelihood of a landslide for Prime Minister Theresa May's Conservative Party. If the Labour Party were to win or even to cut into the Conservative majority in the House of Parliament, it could change the dynamics of Brexit negotiations and cause volatility in global markets.

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-Rob Curran, rob.curran@dowjones.com

(END) Dow Jones Newswires

June 06, 2017 16:53 ET (20:53 GMT)