European Banks Drop after Banco Popular Announced Rights Issue

Lucy Stoeva
26 May, 2016
New York City

European markets closed higher but gains were limited after banks recorded another down day. Banco Popular surprised investors with an announcement of

[R]4:00 PM Frankfurt, Germany – European markets closed higher but gains were limited after banks recorded another down day. Banco Popular surprised investors with an announcement of €2.5 billion rights issue. Daily Mail & General Trust plunged 10% and reported falling advertising revenues.[/R]

European stocks moved higher on Thursday, but concerns over bank capitalization limited market gains.

Banco Popular in Madrid surprisingly announced a €2.5 billion rights issue in an effort to strengthen its balance sheet.

Banks plunged after the announcement of the rights issue and investors worried that more banks may be forced to raise capital and further dilute current shareholders.

Banco Popular plummeted 26.5%, Banco Sabadell lost 5%, CaixaBank fell 4.3%, and UniCredit was down 3.8%.

The euro gained 0.11% against the dollar to $1.1171.

On the positive side, resource stocks benefited after copper futures closed higher. ArcelorMittal surged 7%, Glencore climbed 1.9%, and BHP Billiton gained 1.7%.

Oil prices remained volatile and energy stocks closed the day little changed.

Crude oil prices briefly rose above the $50 threshold after U.S. data showed a larger than expected decline in weekly oil inventories.

However, prices pulled back later in the afternoon as buyers remain cautious ahead of the OPEC meeting on June 2.

By the close of the European markets, Brent crude oil futures traded 0.2% higher at $49.82 per barrel, while WTI crude oil futures were up 0.2% to $49.66 per barrel.

In economic news, Spain''s GDP expanded 0.8% in the first-quarter from the previous three months and grew 3.4% from a year ago, the statistical office INE said.

However, Spain’s IBEX 35 fell 0.5% to 9,079.20, dragged down by the banking sector.

In London, the FTSE 100 index inched up 2.80, or 0.04%, to 6,265.65, while in Frankfurt, the DAX index added 67.50, or 0.66%, to 10,272.71.

In Paris, the CAC 40 index rose 31, or 0.69%, to 4,512.64.

Daily Mail & General Trust Plc fell 10.8% to 664 pence after the publisher reported a sharp decrease in profits and lowered its outlook due to declining print advertising.

The company said print ad revenues across all publications declined 13% in the six-month period to March from the same period a year ago.

Total revenues at the Daily Mail and Mail on Sunday fell 7% in the six months to £242 million.

DMGT warned investors that the print publication unit, DMG Media, would miss its full-year targets.