Wednesday, July 21, 2010

Europe stocks snap losing run; SSL soars after bid

PARIS: European stocks rose on Wednesday, July 21 in a broad rally, climbing for the first time in a week, with investors scooping up recently battered banking shares on hopes the sector's stress test results will be reassuring.

Consumer brand company SSL International shot up 33 percent to an all-time high after consumer goods firm Reckitt Benckiser agreed to buy the Durex condoms and Scholl sandals maker for 2.5 billion pounds ($3.8 billion).

At 1040 GMT, the FTSEurofirst 300 index of top European shares was up 1.5 percent at 1,021.93 points, bouncing back after hitting a two-week low on Tuesday.

The Euro STOXX 50, the euro zone's blue chip index, was up 1.2 percent at 2,659.17 points, after testing a key resistance level of 2,669.29, the index's 38.2 percent Fibonacci retracement of the April high to the May low.

Banking stocks, which have been underperforming the broad market this year on fears about their exposure to euro zone sovereign debt, rallied on Wednesday, with Dexia up 3.6 percent, BNP Paribas up 3.3 percent and Banco Popolare up 2.1 percent.

In an effort to calm investors' jitters over the potential impact of the euro zone debt crisis on Europe's banking system, regulators are assessing how 91 banks across Europe would cope with another economic downturn, and the results are due on Friday after the closing bell.

French Economy Minister Christine Lagarde said on Tuesday she was "confident" about French banks' performance in the tests, while German Chancellor Angela Merkel said on Wednesday the tests must restore confidence in the financial sector.


"We still haven't got any official details on the scenarios being tested, and what will happen with the banks who failed the tests," said Philippe Waechter, head of economic research at Natixis Asset Management.

"But if the tests are credible and transparent enough and if the results confirmed -- as it is expected -- that the banking system is in a relatively good shape, risk aversion could further ease. Recent successful debt auctions in Europe have already pointed into that direction."

Risk aversion was retreating on Wednesday, with the VDAX-NEW volatility index -- Europe's main gauge of investor anxiety -- falling 3.6 percent.

Around Europe, UK's FTSE 100 index was up 1.7 percent, Germany's DAX index was up 1.3 percent, and France's CAC 40 was up 1.8 percent.

Tech shares rallied, helped by forecast-beating results from Apple. Invensys rose 4.2 percent, ARM Holdings gained 3.5 percent, Infineon added 2.2 percent and Nokia climbed 2.1 percent.

"The positive Apple numbers have given the whole sector a major boost," a trader said.

Fiat surged 5.9 percent after the Italian car maker's quarterly profit beat expectations and it said it might raise its targets later this year. - Reuters

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