Portfolio

Europe open: Stocks move up after Spanish bank rescue

Date: Monday 11 Jun 2012

Europe open: Stocks move up after Spanish bank rescue

-Banks deposit €788.2bn overnight at ECB
-Finland will ask for collateral if Spain funds come from EFSF
-Moody´s says events in Spain and Greece may prompt downgrades
-Goldman lowers 3 month price forecasts for industrial metals
-Yield on Spain´s 10 year bond down 11 bp to 6.12%

FTSE-100: 1.65%
Dax-30: 2.09%
Cac-40: 2.01%
Stoxx 600: 1.85%
Ibex 35: 3.90%

The main European equity benchmarks have begun the day with strong upward moves, as investors attempt to gauge whether moves over the weekend to buttress the Spanish financial system will suffice, or not.

On Saturday Spain´s Economics Minister received a pledge from his Eurozone partners for a credit line of up to €100bn for his country´s banks, who under a ‘base scenario’ are thought by the International Monetary Fund to need approximately €40bn. Nonetheless, there are still important details to be disclosed, such as the interest rate that will be applied (some reports hold that it will be below market levels) and the ´seniority´ of the debt to be issued. Yet one of the most important variables seems to be out of anyone´s control in the very short-term (bar massive intervention by authorities); we are speaking of markets´ reaction to the announcement. On a more positive note, the apparently generous terms of the credit line are thought by some to constitute a first step towards a ‘financial union’; precisely one of the things markets most want to see.

Acting as a backdrop however, one cannot lose sight of the Greek elections scheduled for the next 17th of June which have led to heightened tensions. Also worth noting, economic data out over the weekend in China is being described as weak.

From a sector stand-point, and on the DJ Stoxx 600, the best performance is now to be seen in the following sectors: banks (3.7%), insurance (3.01%) and automobiles (2.95%).

Better than expected data in Europe



French industrial production rose 1.5% month-on-month in April (Consensus: -0.1%).

Italian gross domestic product contracted by 0.8% quarter-on-quarter in quarter one, as expected.

Euro nudges slightly above 1.26



The euro/dollar cross has nudged slightly above the 1.26 dollar mark.

Front month Brent crude futures are now 1.133 higher at 100.64 dollars in ICE trading.

AB

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