Second Day Advance in European Markets on the Resurgent Bank Stocks

Lucy Stoeva
15 Feb, 2016
New York City

Stock market indexes extended gains for the second day in a row banking stocks rebounded on possible ECB purchase of Italian bad loans. Telecom sector heated up on the recent merger activity. HSBC Holdings decided to keep its headquarters in London.

[R]4:00 PM Frankfurt, Germany – Stock market indexes extended gains for the second day in a row banking stocks rebounded on possible ECB purchase of Italian bad loans. Telecom sector heated up on the recent merger activity. HSBC Holdings decided to keep its headquarters in London.[/R]

Stock markets in Europe rallied for the second day in a row and banks led the rebound on the possible purchase of Italian bad bank loans by the European Central Bank, while the telecom sector received a boost from M&A activity.

The ECB is reportedly negotiating with the Italian government buying bundles of bad loans banks as part of its asset-purchase program.

Italian banks, heavily hurt by the recent selloff in the financial sector, rallied on the news.

Banca Monte dei Paschi di Siena surged 8.9%, Unipol Gruppo Finanziario soared 8.7%, Banco Popolare Societa Cooperativa added 7.7%, and Banca Popolare di Milano climbed 5.4%.

The advance in the Italian banks led financial stocks in Europe higher, with Greek Eurobank Ergasias up 30%, Dutch group ING Group rising 5.7%, and French BNP Paribas adding 2.5%.

In France, the consolidation in the telecom sector seems imminent after Orange said the merger talks between Orange and rival Bouygues are continuing.

Bouygues climbed 6.7%, Orange gained 3.1%, and Numericable-SFR surged 8.8%.

In Germany, Bundesbank lowered its 2016 inflation forecast to 0.25% from the previous estimate of 1.1%, largely on the sharp plunge in oil price.

For 2017, the German central bank trimmed its inflation forecast to 1.75% from 2%.

The inflation adjustment also raised expectations that the ECB may adjust its eurozone projections and increase the monetary stimulus.

Market indexes also received a boost after Nikkei average in Tokyo surged 7.2%.

In London, FTSE 100 index gained 129.07, or 2.26% to 5,836.67 and in Frankfurt, the DAX index added 267.66, or 2.98%, to 9,235.17.

In Paris, the CAC 40 index surged 140.42, or 3.51%, to 4,135.48.

Trading volume was lower because of the U.S. President’s Day holiday.


Electricite de France SA dropped 2.6% to €10.16 ahead of its earnings release on Tuesday, and the French newspaper Le Figaro said the utility company is expected to report lower income.

HeidelbergCement AG jumped 4.8% to €66.01 ahead of its earnings announcement tomorrow.

Hennes & Mauritz AB, better known as H&M, advanced 2.9% to 276.7 Swedish kroner after the apparel retailer said January sales rose 7% in local currency from the same month a year ago.

The number of stores increased to 3,958 at the end of January from 3,541 in the month a year ago.

HSBC Holdings Plc gained 1.25% to 445.95 pence after the bank decided to keep its headquarters in London instead of moving to Hong Kong.

The bank also announced that it could move 1,000 investment banking jobs from London to Paris if the UK votes to leave the European Union.

Reckitt Benckiser Group Plc soared 6.6% to 6,361 pence after the consumer goods maker reported an increase in profits due to its transition to higher-margin health products.

Higher-margin consumer health product accounted for 33% of net revenue in 2015, up from 25% three years ago.

Adjusted net income for the year ending in December was up 15% at constant currency to £1.87 billion from a year ago.

Revenue was flat at £8.87 billion, but 5% higher from the previous year at constant currency.

Reckitt Benckiser warned that the current rate of growth isn’t sustainable and demand from retailers for flu medicines is likely to slowdown in the first-half of 2016.

The company is targeting comparable net revenue growth between 4% and 5% in 2016.