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Market Steam features Stephen Pope & Spotlight Ideas

Wednesday September 12th 2012


Europe bank stocks cheer German court ruling



European stock markets welcome a German court ruling on the euro zone’s permanent rescue fund in morning trade on Wednesday, with banks leading the charge north.


LONDON (MarketWatch) — European stock markets welcomed a German court ruling on the euro zone’s permanent rescue fund on Wednesday, with banks leading the charge north.

The Stoxx Europe 600 index SXXP rose 0.1% to 22.83.


Risk-sensitive sectors drove the upward move, with National Bank of Greece SA ETE rallying 11%, Credit Agricole SA ACA jumping 5.9% and miner Rio Tinto PLC RIO RIO RIO up 1.5%.

The gains came after the German constitutional court rejected calls to block the ratification of Europe’s 500 billion euro ($643.7 billion) permanent rescue fund, the European Stability Mechanism, and the fiscal pact.

As was expected, however, the judges attached various conditions to the ESM, including a cap on Germany’s contribution. See: Top German court allows ESM ratification

“This is still not the end of the crisis. This is a situation where we have short-term relief, but you have to notice the conditionality effect,” said Stephen Pope, managing partner at Spotlight Ideas.

“Germany had to safeguard the tax papers money, and that’s why they wanted a cap,” he added. “But what happens if more nations ask for help and the ESM runs out of money?”

The next question in the euro-zone crisis story is whether Italy and Spain will turn to the European Union for help and ask for a bailout. With the European Central Bank outlining plans for an unlimited bond-buying program last week and the implementation of the rescue fund in sight, measures are in place to tame the crisis, Frank Oland, Europe analyst at Danske Bank said in a note.

“If Italy and Spain deliver the austerity measures and reforms they have promised, we will hopefully be able to call off the sovereign-debt crisis in a year or two. And at that time, we may be able to look back at the late summer of 2012 and confirm that this time was the turning point,” he said.

“Right now, it looks like the investor confidence in the rescue measures is big enough that there may not be a need for the safety net at all,” he added.

Attention also turned to the U.S., where the Federal Reserve on Thursday concludes a two-day policy meeting, with hopes high that it’ll announce another round of quantitative easing.

U.S. stock futures pointed to a higher open on Wall Street.


Spanish bank Banco Santander SA SANSAN rose 0.6%, while Banco Popular Español SA POP gained 0.7%. The gains helped lift the IBEX 35 index IBEX 0.5% to 7,967.20.

Pressure also eased on Spanish government bonds, where the yield in 10-year papers 10YR_ESP fell 10 basis points to 5.56%, according to electronic trading platform Tradeweb.

Among German stocks, Commerzbank AG CBK rallied 5.5%, while Deutsche Bank AG DBKDB shed 0.5%. The DAX 30 index DAX rose 0.4% to 7,341.88.

In the U.K., banks rose to the top of the London benchmark stock index. Royal Bank of Scotland Group PLC RBS RBS gained 3.6%, Barclays PLC BARC BCS picked up 1.6%, while HSBC Holdings PLC HSBA HBC 5 ticked 0.7% higher.

Mining firms were also on the rise, tracking most metals prices higher. Vedanta Resources PLC VED moved 2.5% higher and BHP Billiton PLC BLT BHPBHP edged up 0.5%.

The FTSE 100 index UKXUKX however, traded 0.1% lower at 5,787.21, as oil major BP PLC BP. BP fell 1%.

The French CAC 40 index PX1 gained 0.4% to 3,551.29. Alstom SA ALO picked up 1.7%, as it secured contracts for air quality control systems in Taiwan and Romania worth a total 160 million euros ($206 million).
See: Alstom gets Taiwan, Romania pacts valued $206M

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