European banking stocks surged on speculation an agreement by euro-area leaders that will allow banks to tap emergency money from the currency union’s rescue funds will stabilize financial markets.
The Bloomberg Europe Banks and Financial Services Index rose 3 percent at 10 a.m. Frankfurt time. Spanish banks led the increase, with Banco Bilbao Vizcaya Argentaria SA and Bankia SA jumping 6 percent and 3.5 percent, respectively.
The leaders of the 17 euro countries opened the door to recapitalizing banks with bailout funds rather than the rescue mechanisms of individual member states once Europe sets up a single banking supervisor. That may speed access to funds for troubled banks and improves the environment for their peers in more fiscally healthy nations, said Michael Seufert, an analyst at Norddeutsche Landesbank in Hanover, Germany.
“There’s a lot of relief that we’re moving toward a situation of stability for the financial sector,” said Seufert. “The probability that banks will get the aid they might need in a timely fashion is now higher.”
European leaders, who held 13 1/2 hours of talks ending at 4:30 a.m. in Brussels today, also dropped the requirement that governments get preferred creditor status on crisis loans to Spain’s blighted banks.
Today’s rally may only last for the short term, as “the agreement still doesn’t solve the euro area’s problems,” Seufert said.