European Markets Surge; Financial Lead

123jump.com Staff
19 Sep, 2008
New York City

Stocks in UK and Europe soar as optimism returned to the markets. UK benchmark index surged 8.9% and indexes in Paris soared 9%, in Germany scaled 5.6% and in Switzerland rose 6%. UK and US regulators banned short selling in financial stocks. The move lifted financial stocks sharply. Royal Bank of Scotland surged 31% and led gainers in the FTSE 100 index. Realty stocks closed surged on the U.S. plan to inject liquidity in mortgage market. Russian market index soared 29%.

[R]1:00 PM New York, 6:00PM London - FSA prohibits the increase of short positions in financial companies. Royal Bank of Scotland estimates exposure to failed banker Lehman of $1.5 billion. Lloyds TSB plans to raise £675 million.[/R]

UK benchmark indexes rose significantly after measures that were instituted by U.K. regulators that were meant to trim the adverse effects of short-selling especially in financial companies.

Europe Markets Review

In London FTSE 100 Index closed higher 431.30 or 8.84% to 5,311.30, in Paris CAC 40 Index increased 367.01 or 9.27% to close at 4,324.87 and in Frankfurt DAX index higher 326.11 or 5.56% to close at 6,189.53. In Zurich trading SMI increased 401.92 or 6.07% to close at 7,025.17.

Russian market index soared 29%.

Of the FTSE 100 Index, 98 rose and 4 declined. Royal Bank of Scotland led advancers in the index shares with a rise of 31.95% after the Financial Services Authority introduced measures to prohibit the increase in net short positions in publicly listed financial companies.

Royal Bank of Scotland said that its exposure to failed investment banker Lehman Brothers is $1.5 billion however the credit protection and other hedges may lower the losses substantially.

FSA Prohibits Increase of Net Short Positions

The Financial Services Authority reported on its Web site yesterday that it has introduced new provisions to the Code of Market Conduct to prohibit the active creation or increase of net short positions in publicly quoted financial companies.

From Tuesday next week, FSA will require daily disclosure of all net short positions exceeding 0.25% of the ordinary share capital of the relevant companies held at market close on the previous working day.

Although the provisions will be reviewed after 30 days, they will remain operational till January 16, 2009.

Effectively the ban on short selling includes 29 financial companies including Barclays, Lloyds TSB Group and HBOS Plc.

Chief executive of FSA Hector Sants said, """"While we still regard short-selling as a legitimate investment technique in normal market conditions, the current extreme circumstances have given rise to disorderly markets. As a result, we have taken this decisive action, after careful consideration, to protect the fundamental integrity and quality of markets and to guard against further instability in the financial sector.""""

Lloyds TSB Group to Raise £675 million

Lloyds TSB Group reported today on its Web site that plans to raise £675 million by selling 5% in a share sale. Only few days ago the bank agreed to acquire the troubled mortgage lender HBOS plc for £12.2 billion.

Gainers & Losers

Royal Bank of Scotland led advancers in the FTSE 100 index shares with a rise of 31.95% followed increases in Kazakhmys Plc of 31.42%, in Barclays of 29.24%, in HBOS Plc of 28.91%, and Eurasian Natural of 27.43%.

Old Mutual jumped 19.42% and Standard Chartered increased 16.97%.

Commodity stocks also gained. Antofagasta soared 22.23%, Xstrata jumped 19.29% and Vedanta Resources increased 16.06%.

ITV led decliners in the FTSE 100 index shares with a fall of 3.23% followed by losses in British American Tobacco of 1.37%, in Unilever Plc of 0.99% and WM Morrison of 0.97%.

Realty Stocks Surge

The largest UK REIT Land Securities rose 7% or 81 cents to 1,298 pence. Minerva, the commercial property developer surged 20% or 16 pence to 94.75 pence. British Land Company added 4.5% or 32.5 pence to 759 pence.