European Banks Pause Ahead of ECB Rate Hike

The European banking sector is experiencing a broad retreat on Tuesday, with nine out of ten monitored stocks declining. Société Générale took the hardest hit, dropping 2.09% despite remaining in positive territory for the week (+1.37%). BNP Paribas fell 1.36%, while KBC Ancora slipped 1.46%. The decline is not isolated to banks, as the neighboring Banking/Insurance segment also retreated by 1.26% with sixteen out of eighteen stocks declining.

The market context remains moderate, with the VIX standing at 15.78 points, indicating an absence of true stress. This downturn comes ahead of a European Central Bank decision on Thursday, where markets are anticipating a 25 basis point increase in the deposit rate to 2.5%. This move is seen as an 'insurance' measure against inflation linked to the energy shock.

Technical indicators paint a nuanced picture, with the sector-weighted RSI remaining at 57.9 and trending above the 50 and 200-day moving averages. However, several stocks show high RSI levels, indicating potential for profit-taking in ING Groep, ABN Amro, and BCP.