Banks under pressure as sovereign debt issues linger
By Barbara Kollmeyer, MarketWatch
MADRID (MarketWatch) — European stock markets rose on Tuesday, supported by an improvement in an indicator of German economic sentiment and a series of well-received debt auctions.
The Stoxx Europe 600 index XX:SXXP +0.53% rose 0.6% to 237.48.
The index dropped 1.9% in the prior session amid fresh doubts over whether last week’s European Union summit had gone far enough to combat the sovereign-debt crisis.
U.S. stock futures pointed to gains for Wall Street amid slightly weaker-than-expected retail sales for November. Traders are also expecting a policy announcement from the U.S. Federal Reserve.
The German DAX 30 index DX:DAX +0.61% rose 0.6% to 5,481.22. The ZEW economic-sentiment indicator for Germany improved 1.4 points in December to minus-53.8, halting a nine-month slide.
“Apparently, the financial-market experts expect the economic activity to slow down, but not to plunge during the next six months,” said ZEW President Wolfgang Franz in a statement.
Economists at Capital Economics cautioned that the rise still doesn’t reverse last month’s fall. They said more reliable business surveys paint a “less gloomy picture, but even they suggest that the recovery has ground to a halt.”
Shares of Volkswagen AG DE:VOW3 +1.33% rose 1.2% after the German auto maker reported that November sales of its core passenger-car brands rose nearly 15% from same month last year. For the first 11 months, sales rose 12% to almost 4.7 million vehicles.
Shares of fellow auto group BMW AG DE:BMW +1.24% rose 1.2%. In Paris, Renault SA FR:RNO +2.03% and Peugeot SA FR:UG +1.63% rose 1.7% and 1.2%, respectively.
A string of debt auctions across Europe that also buoyed markets.
Atif Latif, director of trading at Guardian Stockbrokers, said markets got the biggest boost from the first bill auction by the European Financial Stability Facility, the euro zone’s bailout fund, which sold €1.972 billion in three-month bills at a cover ratio of 3.2 times. That came after decent short-term auctions from Spain, Greece and Belgium, he said.
“The market has been range-bound again today on slightly higher volume and some risk appetite seems to be coming back on the expectation that a year-end rally will materialize,” Latif said in emailed comments. “We have seen more selling on the spikes and the fundamental situation regarding the EU still remains in the forefront.”
Banks remain under pressure
Lingering gloom over last week’s EU summit continued to weigh on sectors such as banks, which have been beaten up throughout the sovereign-debt crisis.
In France, the CAC 40 index FR:PX1 -0.01% was flat at 3,091.05, supported by a 1.2% rise for energy group Total SA FR:FP +1.06% TOT +0.18% amid firmer oil prices.
But banks were a drag, with Societe Generale SA FR:GLE -2.98% down 4%, BNP Paribas SA FR:BNP -2.80% off nearly that much and insurer AXA SA FR:CS -2.49% down 2.6%.
Moody’s Investors Service put eight Spanish banks and two holding companies on review for possible downgrades late Monday due to expectations of higher losses from commercial-real-estate exposure.
Banco Santander SA STD -1.58% ES:SAN -0.77% and BBVA SA BBVA -2.54% ES:BBVA -2.17% were not among the banks listed, but BBVA was still off 3.4%.
The Spain IBEX 35 index XX:IBEX -0.22% was flat at 8,371. An auction of Spanish 12- and 18-month notes saw healthy demand and yields fell from similar auctions in November.
Away from the main index, shares of Lagardere SCA FR:MMB +3.20% rose 2.8% after Deutsche Bank upgraded the firm to buy from hold.
Resource stocks helped the FTSE 100 index UK:UKX +1.00% make some of the day’s best gains so far, with that index up 1% to 5,478.095. Shares of Lloyds Banking Group PLC UK:LLOY +2.07% LYG +0.65% rose nearly 2% after the prior day’s rout.
Miner Rio Tinto PLC UK:RIO +2.58% RIO +1.02% rose 2.9% and energy group BP PLC BP +1.20% UK:BP +1.92% rose nearly 2%.
Shares of hotel and restaurant group Whitbread PLC UK:WTB -4.57% fell nearly 4.6% after a trading update. The group said 13-week sales rose 2.4% on a comparable basis and total sales rose 11.4%. It added that trading conditions continue to be challenging.
Barbara Kollmeyer is an editor for MarketWatch in Madrid.
