Sentiment was fragile on European equity markets yesterday as an early bank-led rebound faded after the release of weaker than expected US housing data.
The markets had also been upset in early trade following news that Moody’s had downgraded Ireland’s sovereign debt and that Hungary had exited funding talks with the International Monetary Fund and European Union.
Banks were a positive factor for much of the session, however, with the sector appearing to become more in demand as the results of stress tests on the European sector neared.
“Overall, we believe the stress tests should be positive for our European banks coverage,” said analysts at Goldman Sachs.
“The results will encourage consolidation of smaller, more fragile institutions, the recapitalisation of select banks, additional information on key exposures and will reaffirm clarity on the strength of large institutions.”
In spite of broader losses, DNB Nor remained the pick of the sector after it said it was looking to expand its business in Asia. Shares in Norway’s largest bank rose 2.9 per cent to NKr72.30.
Takeover speculation, meanwhile, continued to surround Greek banks after Piraeus Bank on Thursday offered to buy government stakes in ATEbank and Hellenic Postbank.
Shares in National Bank of Greece initially shot higher after reports suggested a merger move was imminent from the country’s largest lender.
The company later dismissed the reports, saying no such immediate move was planned. The shares remained 2 per cent higher at €11.20 by the close. Piraeus shares took a breather after a strong end to last week, edging just 0.2 per cent higher to €4.55.
Austria’s Raiffeisen International and its domestic rival Erste Group were among the poorest performers on the Eurofirst 300 index as their exposure to Hungary made them prime sell-off targets. Raiffeisen finished 3.2 per cent lower at €30.84, while Erste fell 1.1 per cent to €28.34.
Meanwhile, Bank of Ireland lost 4.4 per cent to €0.66, while Allied Irish Banks shed 3.5 per cent to €0.85 in response to the Moody’s downgrade.
The pan-European FTSE Eurofirst 300 index ended 0.7 per cent lower at 1,006.26.
Electrolux, the Swedish household electricals group, fell 7.8 per cent to SKr154 after its second-quarter core profits failed to match forecasts and were accompanied by a rather grim outlook on the rest of the year.
Dutch rival Philips posted better second-quarter numbers, but was also downbeat on the second half, pushing its shares down 3.6 per cent to €24.01.
GDF Suez, the French utility, revived moves to merge with International Power of the UK. This was well received in London, where IP’s shares jumped more than 10 per cent, but in Paris GDF Suez edged up just 0.7 per cent to €24.50.
Telecom Italia rose 2.4 per cent to €0.94 after it sold its BBNed unit on Friday to Sweden’s Tele2 for €50m. Morgan Stanley, which advised on the sale, raised its rating on Tele2 on Monday from “underweight” to “equal weight”. Its shares rallied 2 per cent to SKr123.40.
Although logistics group Kuehne & Nagel reported results that met expectations, the shares lost 3.9 per cent to SFr108.50 after industry body Swissmem warned that the strength of the franc would likely dent export demand for the country’s products. Luxury goods groups Richemont and Swatch Group fell 1.1 per cent to SFr38.62 and SFr56.60 respectively.
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