MW: Europe stocks rally as banks rise, yields ease
Nokia plunges 16% after profit warning
By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets got some respite from recent upheaval on Wednesday, with banks rallying and bond yields in Italy and Spain easing further after a member of the European Central Bank’s sparked speculation about a restart of the bank’s bond-buying program.
Upbeat earnings news from Alcoa Inc. overnight also lifted sentiment.
The Stoxx Europe 600 index XX:SXXP +0.74% was up 0.9% at 254.82, after dropping 2.5% on Tuesday.
Sara Sjolin is a MarketWatch reporter, based in London.
“This is a bit of a relief bounce after a very weak yesterday,” said Brian Gallagher, strategist at Dolmen Stockbrokers. “People are looking for stocks that are cheap in valuation and that they would be happy to hold over the next month with elections in France and Greece and potentially weaker data.”
Plunging to the bottom of the index, Nokia Corp. FI:NOK1V -14.49% NOK -13.02% dropped 16.3% after the telecom firm lowered its first quarter outlook for its Devices & Services business. Nokia's shares drop 13% after profit warning
Italian banks posted the biggest gains after sharp falls the prior day. Intesa Sanpaolo SpA IT:ISP +5.45% rallied 5.4%, Banca Popolare di Milano Scarl IT:PMI +5.91% added 6.4%, and UniCredit SpA IT:UCG +5.46% took on 6.3%.
The FTSE MIB index XX:FTSEMIB +1.60% , outperformed other European country-specific indexes and surged 2.3% to 14,785.07.
On Tuesday, the index suffered the biggest one-day loss since November and plunged 5%, while yields on 10-year Italian government bonds IT:10YR_ITA -2.69% added as much as 31 basis points. A basis point is 1/100 percentage point.
Yields on Wednesday were 9 basis points lower at 5.51%.
Yields pushed lower as European Central Bank’s executive board member Benoit Coeure reportedly said the central bank still has the option of restarting its bond-buying program, given current market pressures, though it hasn’t been used recently. ECB's Coeure: Bond-buying still euro-zone option
“I think it would be a short term boost to the market, but above that we still see concerns on the macro front,” said Atif Latif, director of trading at Guardian Stockbrokers.
The German Bundesbank and other ECB members have so far resisted the idea of re-instating the bond-buying program.
“Other countries will take many different views, some may take it as a required route to avoid the issues that have affected other countries that are in trouble,” Latif said. “Those that disagree may see this as an on-going problem that may gulf the whole region.”
Spain and Germany
In Spain, yields on 10-year government bonds ES:10YR_ESP -1.68% were also lower, off 11 basis points at 5.83%, pulling away from the closely watched level of 6%.
The IBEX 35 index XX:IBEX +1.93% jumped 1.9% to 7,576.70, lifted by Bankinter SA ES:BKT +4.56% , up 4.6%, and BBVA SA ES:BBVA +3.78% BBVA +5.15% , moving 3.8% higher.
The broader European banking sector was the main driver for the upward move in equities after HSBC lifted the group to overweight from neutral for the first time in four years.
The positive sentiment also tracked a rise in U.S. stocks, lifted by aluminum producer Alcoa Inc., which late Tuesday kickstarted earnings season with a surprise profit for the first quarter.
“Alcoa is normally a proxy for global growth, but it operates in the aluminum market that has its own problems at the moment,” Gallagher from Dolmen Stockbrokers said.
“I think it’s hard to use it to predict earnings for the broader market, and investors just want to see guidance being met.
“People are pessimistic going into earnings season, so we won’t need big beats to see markets rise. Markets will just be happy if corporations deliver on expectations, while any kind of profit warning will be a negative,” he added.
In Germany, banks helped lift the DAX 30 index DX:DAX +1.03% 1% to 6,674.73. Deutsche Bank AG DE:DBK -4.05% DB +3.47% added 2.3% and Commerzbank AG DE:CBK +3.16% gained 4.1%.
Volkswagen AG DE:VOW3 +3.74% also added support, advancing 2.9%, after reporting a 15% rise in global car sales for its VW passenger car brand. The increase was particularly due to strong sales in the U.S. and Asia, the car maker said. Volkswagen brand March car sales up 15% on year
BMW AG DE:BMW -2.44% tracked Volkswagen higher and took on 2.5% and Daimler AG DE:DAI -4.59% rose 1.2%.
France and U.K.
French bank Credit Agricole SA FR:ACA +1.49% rose 1.5%, while Peugeot SA FR:UG +2.33% added 2.3%. The French CAC 40 index FR:PX1 +0.62% gained 0.6% to 3,237.69.
Steelmaker and miner ArcelorMittal SA FR:MT +3.10% MT +3.57% was 2.6% higher.
Miners were also on the rise in the U.K. Fresnillo PLC UK:FRES +3.43% added 3.4%, Kazakhmys PLC UK:KAZ +1.88% rose 1.9%, while heavyweight Rio Tinto PLC UK:RIO +0.92% RIO +1.07% was up 0.9%. Metals prices were mostly lower.
The FTSE 100 index UK:UKX +0.70% closed 0.7% higher at 5,634.74, also lifted by the banking sector.
Barclays PLC UK:BARC +2.81% BCS +4.04% took on 2.8% after Investec Securities upgraded the stock to buy from hold. Lloyds Banking Group PLC UK:LLOY +2.65% LYG +3.80% added 2.7% and HSBC Holdings PLC UK:HSBA +0.73% HBC +1.39% rose 0.7%.
Weighing on the index, BT Group PLC UK:BT.A -2.47% BT -1.54% lost 2.5% after J.P. Morgan Cazenove cut the stock to neutral from overweight.
Greek shares retreated after rallying on Tuesday on the back of a successful bond auction and lost 0.9% to 723.61 with National Bank of Greece SA GR:ETE -10.24% NBG -5.82% off 10.2%. Media reports said Prime Minister Lucas Papademos confirmed a general election for May 6.
