By Sara Sjolin, MarketWatch
LONDON (MarketWatch) — European stock markets rallied Monday, as investors welcomed progress in U.S. debt negotiations after congressional leaders expressed optimism a deal can be struck to avert the so-called fiscal cliff.
The Stoxx Europe 600 index XX:SXXP +1.47% rose 1.2% to 266.04, recouping a portion of last week’s 2.7% retreat.
“We have had a significant number of weak days and the markets were quite oversold. There’s a perception that progress has been made in fiscal-cliff negotiations,” said Neil Wilkinson, senior fund manager at Royal London Asset Management.
“The U.S. market was very strong [Friday], and we’re playing catch-up in Europe this morning,” he said.
Among notable movers in the index, shares of Nokia Corp. FI:NOK1V +6.45% NOK +1.84% surged 6.2%. The firm’s network-equipment joint venture Nokia Siemens Networks said it is working with Ballard Power Systems Inc. BLDP -7.58% to develop networks that can operate during power blackouts. See: Nokia Siemens, Ballard develop fuel-cell tech
Shares of Barclays PLC UK:BARC +5.00% BCS -0.79% jumped 4.5%, as Goldman Sachs lifted its rating on the U.K. bank to buy from neutral.
However, Fugro NV shares NL:FUR -21.61% tanked 19%, after the firm said late Friday that Arnold Steenbakker will step down as chairman of the board of management because of difference of opinions.
Outside the main benchmark index, shares of SAS AB SE:SAS +25.00% soared 23%, after most of the Scandinavian airline’s employees accepted its major cost-savings plan. See: SAS, cabin-crew union reach agreement
Debt in Greece
Greece grabbed attention a day ahead of a meeting of euro-zone finance ministers, a gathering called to discuss the country’s next disbursement of bailout money and future debt sustainability.
Joerg Asmussen, who sits on the European Central Bank’s executive board, said over the weekend that the euro zone must settle Greece’s financing for the next two years, while also expressing doubt the country will regain market access in following years. See: ECB's Asmussen: Settle Greece financing next week.
After a meeting last week, Eurogroup president Jean-Claude Juncker and International Monetary Fund chief Christine Lagarde clashed over how to reduce Greece’s growing debt pile, openly disagreeing about whether to grant the country two more years to reach its deficit target or not. See: Greece stays in euro, but who foots bill?
“The euro zone really needs to stop tiptoeing around the issue. The question is: ‘Do we want to keep Greece inside the euro tent?’ ” said Stephen Pope, managing partner at Spotlight Ideas, in a note.
“If the answer is yes, the leaders have to get a hard-core number on what that will cost — clearly another deep if not total write-down of Greek outstanding debt. If that price is too high to pay — do the right thing, cut Greece off,” he said.
Also Monday, Benoit Coeure, another member of the ECB’s executive board, said all euro-zone banks should be covered by a single banking supervisor. See: ECB aide: Single supervisor must cover all banks.
Fiscal-cliff talks
Investors also looked to the U.S., where signs indicated policy makers might be getting closer to an agreement to avoid hundreds of billions in automatic spending cuts and tax hikes slated to take effect Jan. 1, referred to as the fiscal cliff.
President Barack Obama said over the weekend he is confident “we can get our fiscal situation dealt with,” while House Minority Leader Nancy Pelosi said any deal must include tax-rate hikes for the wealthy.
Republicans, meanwhile, expressed some willingness to consider new revenue, but they didn’t endorse changes in tax rates for the rich. See: Obama and Pelosi hopeful on budget deal .
Concerns that Democrats and Republicans would fail to make a deal in time hamstrung European investors last week, sending the Stoxx Europe 600 to its lowest level since early August.
Wall Street benchmarks, however, closed higher on Friday, after both sides viewed the opening round of negotiations as constructive. And U.S. stock futures pointed to a higher Monday open. See: Budget optimism boosts U.S. stock futures.
Movers
On Monday, risk-sensitive sectors such as banking and resource shares were among major gainers.
In Germany, shares of Commerzbank AG DE:CBK +3.43% rallied 3.9% as Deutsche Bank AG DE:DBK +2.36% DB -2.46% added 3.2%.
The DAX 30 index DX:DAX +1.81% traded 1.5% higher at 7,054.70.
And among French banks, shares of Credit Agricole SA FR:ACA +3.13% jumped 3.7%, while Société Générale SA FR:GLE +3.13% rose 3.3%.
The CAC 40 index FR:PX1 +1.93% rallied 1.6% to 3,393.36.
Banks were also on the rise in the U.K., with shares of HSBC Holdings PLC UK:HSBA +2.72% HBC -0.13% HK:5 +0.95% trading up 2.4%, as the bank said it is in talks to sell its stake in China’s second-largest insurance firm. See: HSBC in talks on possible sale of Ping An stake.
Shares of oil major BP PLC UK:BP +2.78% BP -0.67% added 2.5%. The Sunday Times reported that BP’s planning to spend as much as 3.7 billion pounds ($5.9 billion) to buy back its own stock to revive its share price; a company representative declined to comment.
Also higher, Royal Dutch Shell PLC shares UK:RDSB +0.93% RDS.B -0.90% picked up 0.6%, tracking oil prices higher. See: Oil adds to gains as dollar drops.
The FTSE 100 index UK:UKX +1.48% gained 1.2% to 5,672.14 in London.
Sara Sjolin is a MarketWatch reporter, based in London.
