NEW YORK: European stock markets fizzed higher Monday as investors toasted news of a 17-billion-euro ($19 billion) rescue deal in Italy’s long-troubled bank sector.
Equity markets in London, Paris and Frankfurt all rose, while US stocks were mixed, with investors shifting funds from highly valued technology shares to disfavored sectors, including retailers.
Oil prices edged higher for the third straight session.
In Italy, the government stepped in to liquidate two insolvent banks, Veneto Banca and Banca Popolare di Vicenza, averting a threat to the country’s fragile banking system.
The two failing lenders’ healthy assets are being sold to Intesa Sanpaolo, one of Italy’s biggest banks, for a symbolic price of one euro. At the same time, outstanding loans that are in or near default are being transferred into a so-called “bad bank.”
The deal, unveiled Sunday, is likely to cost Italian taxpayers up to 17 billion euros.
The news was greeted with relief across trading floors, amid fears of a potential new phase in the eurozone debt crisis.
“Italy has just shown the age of bailouts is not over. That significantly reduces the risk of an investment in a bank going sour,” said Jasper Lawler, Senior Market Analyst at LCG.
Some cautioned, however, that the weekend’s rescue mission could be one of several to come.
“Let’s hope the Italian government has deep pockets given that this particular bailout is a fraction of the non-performing loans in the Italian banking system, of which it is estimated there are about EUR300 billion,” said Michael Hewson at CMC Markets.
The European bank sector rebounded.
Commerzbank and Deutsche Bank jumped by up to two percent in Frankfurt, while in London, Barclays, Royal Bank of Scotland and HSBC all added 1.5 percent or more.
Also on the continent, Nestle and L’Oreal shares boomed after US hedge fund Third Point bought a one percent stake in the Swiss food giant and immediately urged it to sell its large holding in L’Oreal.
In the US, beaten-down retailers advanced, including Wal-Mart Stores and Costco Wholesale. Media and banking shares also were strong, while high-flying technology shares were pressured.
The gainers included sectors that have been beaten down for much of 2017, but are thought to be well situated if investors rotate to new sectors, analysts said.
Key figures around 2050 GMT
New York – Dow: UP 0.1 percent at 21,409.55 (close)
New York – S&P 500: UP less than 0.1 percent at 2,439.07 (close)
New York – Nasdaq: DOWN 0.3 percent at 6,247.15 (close)
London – FTSE 100: UP 0.3 percent at 7,446.80 points (close)
Frankfurt – DAX 30: UP 0.3 percent at 12,770.83 (close)
Paris – CAC 40: UP 0.6 percent at 5,295.75 (close)
EURO STOXX 50: UP 0.5 percent at 3,561.76
Tokyo – Nikkei 225: UP 0.1 percent at 20,153.35 (close)
Hong Kong – Hang Seng: UP 0.8 percent at 25,862.49 (close)
Shanghai – Composite: UP 0.9 percent at 3,185.44 (close)
Euro/dollar: DOWN at $1.1181 from $1.1193 at 2100 GMT on Friday
Pound/dollar: UP at $1.2721 from $1.2720
Dollar/yen: UP at 111.89 yen from 111.29 yen
Oil – Brent North Sea: UP 29 cents at $45.83 per barrel
Oil – West Texas Intermediate: UP 37 cents at $43.38 per barrel
HSBC (isin = GB0005405286)
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ROYAL BANK OF SCOTLAND GROUP (isin = GB00B7T77214)
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L’OREAL (isin = FR0000120321)
COMMERZBANK (isin = DE0008032004)
DEUTSCHE BANK (isin = DE0005140008)
THIRD POINT REINSURANCE (isin = BMG8827U1009)
BARCLAYS (isin = GB0031348658)
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