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Bank shares have lifted European stock markets amid hopeful economic signals, results from US banks and a report suggesting the ECB was providing more loans to banks than had been thought.
Successful French and Spanish bond auctions and falling US unemployment claims all helped improve sentiment.
Bank of America and Morgan Stanley’s results were better than expected.
Commerzbank shares rose 15% after it said it would be able to increase its capital without government help.
Also in Frankfurt, Deutsche Bank rose 8%.
In London, Barclays shares rose 10% while Lloyds and RBS were both up 9%.
In Paris, Societe Generale rose 13%, Credit Agricole rose 9% and BNP Paribas gained 8%.
The soaring bank shares helped Europe’s benchmark indexes to strong closes, with the FTSE 100 ending up 0.7% at 5,741 points, its highest closing level since the start of August.
The Cac 40 in Paris closed up 2% while the Dax in Frankfurt gained 1%.
It represents slightly more substantial sticky plaster for the eurozone than many investors may have believed was being applied.”
Some of the gains in banking shares were sparked by a report from Morgan Stanley, which said that the European Central Bank was flooding the eurozone banking system with even more cheap loans than had previously been thought.
“Perhaps more significantly, Morgan Stanley thinks that financial regulators and the ECB are together conspiring to give incentives to banks to use much of this cheap cash to buy government debt, especial Italian and French sovereign debt,” said BBC business editor Robert Peston.
“Or to put it another way, the ECB doesn’t want to be the lender of last resort in a direct sense to a government struggling to borrow such as Italy. But it is happy to lend to Italy when mediated by Italian banks, even when those banks aren’t the strongest on the planet.”