European Indexes Stage Huge Rally
The FTSE 100 (8.84%) closed firmly higher, with US indices chalking up record gains at the European close. US Treasury secretary Paulson announced plans to take further, decisive action to fundamentally and comprehensively address the root cause of the financial system's stresses. The US plans a troubled asset relief program and Paulson says he will work with Congress to pass necessary legislation. The FSA and the Irish SE decided to ban short-selling of financials temporarily: HBOS (+28.91%), LLOYDSTSB (+20.32%), RBS (+31.95%), ANGLO IRISH (+18.28%), BANK OF IRELAND (+41.78%) soar. The WTI fell below US$100. HSBC (+12.9%) confirmed it has abandoned plans to buy Lone Star's 51% stake in KEB after failing to agree on a price. The bank is also said to be one of five banks that have come forward to evaluate Washington Mutual's financial records, according to the FT. ITV (-3.23%) struck a deal with Setanta to show highlights of the away legs of England's remaining World Cup qualifying games. A private equity consortium has withdrawn its proposal for INFORMA (+0.44%). The FT said the consortium's decision was due to lending banks being unable to finance an increased bid. IMAGINATION TECHNOLOGIES (+4.62%) expects further progress this year.
The CAC 40 (+9.27%) closed the session rocketing amid high volume and posting its biggest-ever one day gain. Meanwhile, Wall Street was in fine fettle as US Treasury Secretary Henry Paulson and Fed's chairman Ben Bernanke proposed moving troubled assets from the balance sheets of US financial companies into a new institution. In other news, Morgan Stanley raised US financial stocks to overweight from neutral. Note that today quarterly futures and options contracts expired. At home, financials soared: CREDIT AGRICOLE (+26.32%), BNP PARIBAS (+17.50%), SOCGEN (+19.94%), AXA (+21.28%), DEXIA (+22.50%), NATIXIS (+25.31%). Elsewhere, oil prices enjoyed the markets' restored confidence. WTI traded c.US$99.35 a barrel at the European close. TOTAL (+9.76%) jumped. In corporate news, the oil group agreed to explore for natural gas in Bolivia together with Gazprom, according to Russian state television. ARCELOR MITTAL (+10.96%) also profited from the general rally. The company is discussing building a 6m metric tonne capacity steel mill in India's Chhattisgarh with the state government, the Economic Times reported. EADS (+5.82%) took off as Airbus CEO Tom Enders denied a La Tribune report that Airbus will miss the revised A380 delivery schedule given in May. Airbus is sticking with its goal of delivering 12 A380 superjumbo jetliners this year.
The Dax (+5.56%) finished a memorable week with record gains following US government action to tackle the credit crisis. In Frankfurt, COMMERZBANK (+20.05%), DEUTSCHE BANK (+14.36%), ALLIANZ (+12.43%), HYPO REAL ESTATE (+3.54%) clocked up solid gains. Hopes are that the creation of a Resolution Trust Corporation style entity will help turn around the turmoil in financial markets. This would be seen as a system-wide solution but remains to be passed through Congress. Merrill Lynch strategist Richard Bernstein said applying 1989's failure rate to today's banking universe suggests that approximately 280 banks and thrifts could possibly fail; he mentioned that the failure rate will increase over the next several years. Meanwhile, regulators in the US and UK cracked down on short selling and that gave financial stocks an added lift today, although one investment manager commented that this is 'a pointless, short term measure'. Apart from financials, which were additionally volatile today given triple withcing, SAP (+4.26%) rose after business software maker Oracle's quarterly results beat forecasts. SOFTWARE AG (+7.2%) climbed as Merrill added the stock to its tech most preferred list.
Spanish shares, along with European peers, ended this nerve wracking week, surprisingly higher, responding positively to government efforts to restore confidence in financial markets. Wall Street was also trading higher on the news that the Treasury and the Fed are putting together a permanent solution to address the credit crisis.
Also, UK and US regulators were cracking down on short selling. The measures gave the beleaguered financial sector a much needed boost - with double digit percentage gains for several of the Spanish banks. SANTANDER (+12.96%) could be on the M&A trail again, with press sources mentioning Washington Mutual and Bank of Ireland as potential targets. Zurich Financial completed the acquisition of a 50% stake in SABADELL's (+18.27%) insurance operations. Vivendi's offer for PRISA's (+8.46%) Digital+ unit is EUR 2.7bn while News Corp offered EUR 2.75bn, La Gaceta reported. GAMESA's (+9.16%) subsidiary Made signed a EUR 200m agreement with Tunisian company STEG for the supply of 91 AE-61 wind turbine generators. Electric utilities were in focus on news the CNE is to propose to the government an average 2.8-10.4% hike in electricity tariffs from 4Q. In broker action, TELEFONICA (+5.9%) received a target hike from Deutsche Bank.
Nordic bourses closed sharply higher. OMXS30 (+8.98%), OMXHPI (+8.89%), OSEBX (+8.86%) and OMXC20 (+6.81%). Wall Street is also marked higher as some optimism was restored to the markets after news that US Treasury Secretary Paulson and Congressional leaders are working on a plan to deal with the bad debt clogging up the financial system. Locally, SEB (+17.36%) CEO Falkgren told DI Swedish banks are well prepared for the financial crisis, adding that the bank has a high level of liquidity and can continue lending. SWEDBANK (+17.58%) CEO Liden is quoted in Lithuanian daily Lietuvos rytas as saying that the bank will increase its loan portfolio in the Baltic region in spite of a slowing world economy, Reuters reported. In other news, SAAB (-0.92%) released a statement commenting on the government's working group's proposal for a reduction in the budget for defence material. It added 'the projects that will be terminated or implemented with a reduced level of ambition according to the working group may have an impact on Saab's future structure and direction'. The company expects the impact from the announcement to be moderate. LUNDIN PETROLEUM (+10.58%) said it has started drilling at Langansky Block in the northern Caspian Sea in Russia. Broker-wise, S&P ER upgraded NOVO NORDISK (+3.15%) to strong buy. Goldman added KONECRANES (+20.24%) to its conviction buy list.