Banks remain weak; Irish, Greek markets head sharply lower
By Simon Kennedy, MarketWatch
LONDON (MarketWatch) -- European stock markets erased early losses to trade higher Wednesday amid relief over a successful Portuguese debt auction, although many financial stocks remained weak.
The Stoxx Europe 600 index (ST:SXXP 262.24, +2.48, +0.96%) rose 0.9% to 262.08.
Among the main regional indexes, the U.K. FTSE 100 index (UK:UKX 5,432, +24.33, +0.45%) gained 0.4% to 5,428.41 and the French CAC 40 index (FR:PX1 3,679, +34.80, +0.96%) advanced 0.9% to 3,676.65.
The German DAX 30 index (DX:DAX 6,165, +46.90, +0.77%) added 0.7% to 6,159.85.
European indexes also extended their gains after shares opened higher on Wall Street ahead of the Federal Reserve's latest report on U.S. economic activity.
Most bank stocks were again weak in Europe, following sharp losses in the previous session, as worries over exposure to sovereign debt in peripheral European markets have come back into focus.
Portugal successfully completed a bond auction Wednesday, helping to alleviate some of those worries.
The Portuguese government saw its borrowing costs rise, from previous debt auctions, but demand was relatively strong. Other European markets, however, remained a concern. See Currencies.
"European peripheral debt is the key issue at the moment, with Irish spreads widening out again today," said Stephen Taylor, a strategist at Dolmen Stockbrokers. Additional worries about Ireland have in part been sparked by the rising cost of bailing out Anglo Irish Bank, Taylor said.
He noted that those fears have pushed Irish government bond yields to record levels.
Shares in Bank of Ireland (IE:BIR 0.69, -0.03, -4.17%) (IRE 3.65, -0.08, -2.24%) dropped 4.4%, and Allied Irish Bank (IE:AIB 0.76, -.00, -0.26%) fell 1.2%.
The benchmark Irish ISEQ index slipped about 1% to 2,753.89.
Greece was also in focus after the National Bank of Greece (NBG 2.46, +0.06, +2.50%) said late Tuesday that it will raise 2.8 billion euros of fresh capital. Shares of the bank were down 6.4% in Athens. Greek authorities also revised down second-quarter gross domestic product figures, saying the economy contracted 1.8% in the quarter, compared to the previous estimate of a 1.5% decline.
The country's benchmark ASE Composite index dropped 2% to 1,582.82.
Data from Germany was also relatively weak. Figures showed industrial production posted a smaller-than-expected 0.1% rise, reinforcing expectations that Europe's largest economy will see slower demand as the global economy runs into headwinds. See Economic Report.
Among other lenders, Barclays (UK:BARC 309.40, -4.60, -1.47%) (BCS 19.17, +0.04, +0.21%) dropped 1.4% in London, extending losses from the previous session when it named Robert Diamond as its next chief executive.
