Left Menu
Development News Edition

UPDATE 2-Banks sizzle as European stocks log fourth week of gains

Reuters | Updated: 13-09-2019 22:52 IST | Created: 13-09-2019 22:51 IST
UPDATE 2-Banks sizzle as European stocks log fourth week of gains
Image Credit: Pixabay

A surge in banks, miners and automakers galvanised European stocks on Friday, as continued rotation into the cyclical sectors amid signs of progress in U.S.-China trade talks drove the STOXX 600 to its fourth straight week of gains. In a week that saw trade tensions between Washington and Beijing thaw and the European Central Bank cut rates deeper into negative territory and relaunch bond purchases with no scheduled end-date, banking shares were the star performers.

Euro zone banks, which wavered after the ECB decision on Thursday, rallied 2.4%, with analysts citing the central bank's easing of the terms of its long-term loans to banks and introduction of tiered deposit rate as offsetting the pain of negative rates. The euro zone banks index, up 7% on the week, tacked on its biggest weekly gain since March 2017.

"The new tiering system for the banks ought to help the North European banks that have built up large excess deposits while the cheaper loans should help the funding costs of the Southern banks," Jefferies analysts wrote in a client note. According to Jefferies' calculation, the old system (without tiering) was costing euro area banks 7.14 billion euros per year, while the new system will cost them 5.62 billion euros per year.

German banks are set to benefit by 295 million euros, Italian banks by 221 million euros and Spanish banks by 234 million euros, analysts at Jefferies said. Indeed, Italian banks rallied with a 3.2% gain, with main indexes in Milan and Madrid rising between 0.4% and 0.6%, respectively.

Caixabank and Banco Sabadell both up more than 7%, were the top gainers on the STOXX 600. Deutsche Bank rose 3% after becoming the first of 16 financial services companies to resolve claims that it conspired to rig prices of bonds issued by Fannie Mae and Freddie Mac.

In a change of heart among investors who had been buying defensive stocks for much of this year on worries about global trade disputes tipping the world into a recession, momentum stocks such as automakers and miners saw a huge demand this week. Trade-reliant commodity-linked miners jumped 2.7%, leading gains among major European sectors, and automotive stocks were boosted by fresh indications that a prolonged trade war between the United States and China was thawing.

After Beijing and Washington made tariff concessions to each other, U.S. President Donald Trump said he could consider an interim trade deal with China ahead of high-level negotiations in October. Both the pan-European STOXX 600 index and the euro zone only index closed about 0.3 higher on the day, while tacking on more than 1% for the week.

The food & beverage index was the biggest decliner on the STOXX 600 as investors continued to rotate out of defensive stocks. Roche Holding was the biggest boost to main stocks index as it reported positive data from a primary progressive MS (PPMS) study.

Shares of Atlantia tumbled 8% after three employees of companies owned by the Italian infrastructure group were placed under house, as part of an investigation into the safety of motorway viaducts following the collapse of a bridge in Genoa. Traders said the arrest revived concerns that the government could make good on a threat of revoking the company's motorway concession.

The London Stock Exchange jumped another 3.6% after it rejected the Hong Kong bourse's $39 billion takeover offer, opting to stick with its planned purchase of data and analytics group Refinitiv. Thyssenkrupp's shares rose 2% to a fresh ten-week high after Singapore's state investor GIC Pte Ltd raised its stake in the ailing German conglomerate. Its shares have surged some 40% since mid-August, boosted by hopes for a sale of its prized elevator division.


TRENDING

OPINION / BLOG / INTERVIEW

Post-COVID-19 Nigeria needs a robust Health Management Information System to handle high disease burden

Nigeria is among a few countries that conceptualised a health management information system HMIS in the early 90s but implementation has been a challenge till date. Besides COVID-19, the country has a huge burden of communicable and non-com...

Morocco COVID-19 response: A fragile health system and the deteriorating situation

Learning from its European neighbors, Morocco imposed drastic measures from the initial stages of the COVID-19 outbreak to try to contain its spread. The strategy worked for a few months but the cases have surged after mid-June. In this sit...

COVID-19: Argentina’s health system inefficiencies exaggerate flaws of health information system

You can recover from a drop in the GDP, but you cant recover from death, was the straightforward mindset of Argentinas President Alberto Fernndez and defined the countrys response to COVID-19. The South American nation imposed a strict...

Videos

Latest News

NZ prime minister on course for election victory - poll

New Zealand Prime Minister Jacinda Ardern is poised to retain power at next months election, a widely watched poll showed on Sunday, although it said a recent COVID-19 outbreak has dented her support slightly.A Newshub-Reid Research Poll re...

Amitabh Bachchan on SP Balasubrahmanyam: He was voice of great divinity and soul

Megastar Amitabh Bachchan has paid tributes to the legendary SP Balasubrahmanyam, calling the late singer a modest man despite towering achievements. Balasubrahmanyam, 74, died on Friday after an over two month-long battle with coronavirusW...

BJP leader Agnimitra Paul tests positive for COVID-19

BJP womens wing president in West Bengal Agnimitra Paul said on Sunday she has been diagnosed with COVID-19, and requested people who came in touch with her recently to get themselves tested. Paul, who is also a well-known fashion designer,...

Focus will be on unearthing more talent like Shafali Verma: new chief selector Neetu David

Newly-appointed womens chief selector Neetu David says her panels focus will be on unearthing more young talent like 16-year-old Shafali Verma, who became an overnight star with her rare six-hitting ability. One of the finest spinners to ha...

Give Feedback