Royal Bank of Scotland, Natixis higher, Royal Dutch Shell pressured
A turnaround in the banking sector helped Europe stocks bounce off their worst closing levels in nearly six years on Monday, after reports that Citigroup wouldn't be fully nationalized and that Royal Bank of Scotland would break itself in half.
The gains also came as European leaders called for doubling the International Monetary Fund's war chest to $500 billion to assist Central and Eastern European nations, as well as for increased regulation of hedge funds and rating agencies. See story.
The pan-European Dow Jones Stoxx 600 (ST:SXXP: news , chart , profile ) climbed 0.6% to 177.87, as the banking sector took back some sharp losses made last week when nationalization fears hit the sector.
U.S. stocks also advanced after the Wall Street Journal reported that Citigroup was in talks with the U.S. government for an increased stake but that the government would stop short of fully nationalizing the lender. See Citi story. See Indications.
Closer to home, Royal Bank of Scotland jumped 16.6% in London. The lender plans to split in two, slash costs by more than 1 billion pounds ($1.46 billion) and potentially cut up to 20,000 jobs. See full story.
And French lender Natixis rose 9.7% on a report of a possible 1.5-billion-euro fund from its soon-to-be-merged parents, Groupe Banque Populaire and Groupe Caisse d'Epargne.
"In our opinion, the current developments show the commitment of countries to support their banks," noted strategists at LBBW.
The German DAX 30 (DX:1876534: news , chart , profile ) added 0.9% to 4,051.23 and the French CAC 40 (FR:1804546: news , chart , profile ) rose 0.9% to 2,775.08. The U.K. FTSE 100 (UK:UKX: news , chart , profile ) traded up 0.3% to 3,901.87, underperforming rivals, as oil producers weighed. See London Markets.
Royal Dutch Shel shares fell 1.3% and BP shares declined 0.7%.
Barclays Capital said that BP and Royal Dutch Shell are its key underweights in the large-cap European oil sector, noting 30% outperformance over the last twelve months. It stared the sector at negative.
"Facing the largest-ever fall in oil price, the European integrated oil sector is trading near an all-time high versus the market on 2009 earnings forecasts," the broker said.
Still, BarCap was more positive on Total (FR:FP: news , chart , profile ) , up 1.3%, Eni (IT:ENI: news , chart , profile ) , up 0.6%, and Repsol (ES:REP: news , chart , profile ) , up 1.1%., starting these companies at overweight.
Eni and Total have more defensive earnings and cashflows and are less expensive than the integrated group, while Repsol has higher financial risk but less operational leverage to oil price weakness, the broker noted.
Unicredit, Swiss Life advance
Back with financials and Italy's Unicredit (IT:UCG: news , chart , profile ) was another standout, rising 9.2%, after reassuring on 2008 profit trends.
Additionally, Swiss Life Holding (CH:SLHN: news , chart , profile ) shares extended sharp gains made Friday with a 9.3% rise.
UBS upgraded the insurance firm to neutral from sell, noting the firm's improved solvency ratio which it said relieved capital concerns. Citigroup upgraded the stock to buy from hold, saying the statement goes a long way to arguing that it can do without a dilutive capital increase.
Of the losers, UBS shares declined another 7.7% as investors continued to fret about U.S. efforts to acquire the names of 52,000 accountholders.
Other private banks also slid as the move raised worries that the private banking model in Switzerland is coming under threat. Credit Suisse (CH:CSGN: news , chart , profile ) shares lost 3.8% and Julius Baer (CH:BAER: news , chart , profile ) shares fell 0.9%. See full story.
Also, European leaders of the Group of 20 called Sunday for more transparency and regulation of all financial markets, products and investors, including hedge funds, according to published reports. See full story.
French construction firm Saint-Gobain (FR:SGO: news , chart , profile ) shares extended Friday's losses with an 9% drop. Last week, it announced that it intends to raise capital from its shareholders.
TomTom (NL:TOM2: news , chart , profile ) shares fell 4% ahead of fourth-quarter results out Tuesday. Analysts expect net income of 31 million euros on revenue of 529 million euros, according to data compiled by the firm.
Rival Garmin aid Monday that its fourth-quarter profit nearly halved.
