ING shares rise sharply, Ericsson, Prudential also gain
By Sarah Turner, MarketWatch
LONDON (MarketWatch) -- European shares rose sharply on Monday, as oil firms gained, investors welcomed better-than-forecast earnings from network maker Ericsson and ING took back some of the previous session's heavy losses.
The pan-European Dow Jones Stoxx 600 index climbed 3.6% to 221.99.
Oil producers doing well included BP hich jumped 10.4%, and Royal Dutch Shell , up 10.6%, as light sweet crude-oil futures rose $1.21 to $73.34 a barrel ahead of an OPEC meeting later in the week.
Overall, the U.K. FTSE 100 index closed up 5.4% to 4,282.67 and the French CAC-40 index rose 3.6% to 3,448.51.
The German DAX 30 index to 4,835.01, pressured by a 22.6% drop in Volkswagen shares.
Even after Monday's drop, Volkswagen shares are still up 40% from Sep. 1 in a rise many see as a short-covering rally.
U.S. stocks rose Monday as traders grew more confident that government measures to stabilize the financial system will be successful. See Friday's U.S. Market Snapshot. See Monday's Snapshot.
A key measure of short-term dollar borrowing costs posted a large drop Monday. The London interbank offered rate, or Libor, for three-month dollar loans fell to 4.05875% from 4.41875% Friday, news reports said.
"Market direction currently is a tug of war between the positives of cheap valuations, bearish sentiment and drastic policy action and the negatives of deleveraging, the recession and uncertainty in general," said European equity strategists at Morgan Stanley.
ING regains some poise
Dutch financial giant ING Groep advanced 29.2%, after dropping 27.5% on Friday.
The firm said Sunday that it will receive a 10 billion euro ($13.4 billion) capital injection from the Netherlands government. See full story.
ING is also selling its Taiwanese life insurance business to Fubon Financial Holding Co. for $600 million in shares and subordinated debt securities.
"Following these initiatives, ING is moving from being at the bottom of our sector capital assessment to being among the best capitalized companies," said Merrill Lynch analysts.
Merrill Lynch believes that leading European banks could require an extra 73 billion euros of capital. The broker said investors are likely to attach discounts to share prices of banks that are perceived to be too thinly capitalized.
Societe Generale , BNP Paribas and Deutsche Bank look relatively low on a tangible equity/asset ratio, according to the broker.
Societe Generale shares fell 3.1%. It declined to comment on speculation that the French bank will have to raise more capital, Dow Jones Newswires reported.
BNP Paribas shares dropped 1.9%, while Deutsche Bank shares advanced 4% on the day that the German government approved the terms of its financial-sector rescue package.
