European Markets Slide, Banks Lead Gainers

Barry Randall
07 Jan, 2013
New York City

European markets traded lower but banks led the gainers after Basel Committee capitulated to pressure from large global banks and eased implementation of new capital and liquidity rules.

[R]4:00 PM Frankfurt – European markets traded lower but banks led the gainers after Basel Committee capitulated to pressure from large global banks and eased implementation of new capital and liquidity rules.[/R]

European markets traded lower across the region but banks led the gainers after global regulators permitted four more years to implement higher capital standards.

In London, FTSE 100 index decreased 20.0 or 0.3% to 6,070; in Frankfurt, DAX index fell 53.8 or 0.7% to 7,723 and in Paris CAC 40 index declined 29.7 or 0.8% to 3,700.

The euro traded at a three-week low against the dollar to $1.307.

Basel Committee that regulates global banks permitted four more years to banks to arrange for more capital and also allowed wider choice of assets to meet liquidity and capital requirements.

The banks are expected to benefit from the eased phasing of revised standards and will be able to use equities, residential mortgage securities and high yield corporate bonds, in addition to government bonds.

The Basel Committee has been under pressure from banks in Europe and U.S. to avoid meeting new regulations and have been angling for longer time frame to implement higher capital requirements.

After four years of financial crisis, banks are still vulnerable from another financial shock and still pose a systemic risk that may lead to another large bailout.

Under the eased standards, banks are required to begin implementing from 2015 and will have up to 2019 to complete full implementation.

Swiss franc fell against most of international currencies after Swiss National Bank Governing Board member Fritz Zurbruegg said that the central bank cannot raise rates despite the strong property market.

Swiss franc fell 0.2% to 92.61 centimes to a dollar and traded at 1.209 a euro.

Stocks in Review

Banks led the gainers in European trading after Basel Committee made a U-turn in requesting banks to implement tougher capital and liquidity reserves.

Societe Generale increased 68 cents or 2.4% to €30.01 and Credit Agricole gained 21 cents or 3% to €6.56. BNP Paribas SA added 1.8% or 80 cents to€ 45.18.

Deutsche Bank gained 1.03 or 3% to €35.82 and UniCredit SpA added 10 cents or 2.6 to €3.99.

Air France-KLM gained 3% or 23 cents to €7.89 after a report in Italian newspaper Il Messaggero that the French airline KLM may make a bid for Alitalia. Air France said it has no plans to make a bid.

Rolls-Royce fell 1.6% to 903 pence after the largest European commercial aircraft engine maker was accused in a Sunday Times report that it bribed an executive at Air China Ltd and China Eastern Airlines Corp to obtain $2 billion in engine contracts.

Serious Fraud Office of UK is holding an enquiry into company’s activities.

RWE AG dropped 2.5% to €31.19 and led the decliners among all utilities in Europe after HSBC lowered its view on the stock and cited lower energy prices in Germany.

Faurecia, the maker of automotive interiors controlled by Peugeot surged 7% to €13.55 on the hopes that Peugeot may sell its stake in the company.

Wereldhave increased 1.9% to €49.91 after the Dutch real estate company said it agreed to sell its U.S. real estate portfolio to Lone Star Funds for about $720 million. Wereldhave plans to use proceeds to lower its debt.