Sun, Sep 10, 2017 - Page 14 News List

Europe’s banks outperform on ECB talk as euro gains

Reuters, MILAN, Italy

European shares ended little changed on Friday as the euro’s rally dimmed appetite for regional stocks, but talk about possible cuts to European Central Bank (ECB) stimulus boosted banks.

The broader pan-European STOXX 600 benchmark edged 0.15 percent higher, while eurozone blue chips ended unchanged. The STOXX 600 fell 0.2 percent from last week’s 376.14.

After suffering four straight sessions in the red, European banks rose 0.9 percent, leading gainers in Europe, after Reuters reported that ECB policymakers had agreed at Thursday’s meeting on the need for a cut in stimulus.

Analysts say a strong euro could have a negative impact on bank earnings, although that could be mitigated by a boost to their capital adequacy ratio, while strength in the currency accompanied by strong economic growth is seen as positive.

Mediobanca Securities s.P.a. said that Spanish lenders BBVA and Santander SA could be among the most hit in terms of earnings, but were also expected to get a good capital boost, while Deutsche Bank AG was seen benefiting both on core capital and earnings.

The banking sector’s lending business benefits from higher rates and investors fear the ECB could delay policy tightening if the euro keeps on strengthening against the US dollar.

However, for Laurent Gaetani, head of Degroof Petercam Gestion SA, the weakening of some banks’ share price presents an opportunity to buy on the dip.

“These are entry points,” the French asset manager said, adding that he was “overweight” on the sector.

Elsewhere, shares in British pub operator Greene King PLC fell 15.7 percent after a weak sales update and French fuel storage company Rubis SCA was down 4.1 percent after its first half results.

Another big faller was France’s Hermes International SCA whose shares fell 2.6 percent.

The luxury group had been expected to join the CAC 40 index, but STMicroelectronics NV, up 0.6 percent, was admitted instead.

Akzo Nobel NV lost 0.6 percent after it issued a profit warning and announced a revamp that will include the chief financial officer stepping aside and a shake-up to its paints and industrial coatings businesses.

In the automobile sector, Volkswagen AG was up 0.5 percent after reports it was actively working on deals to sell non-core assets accounting for as much as 20 percent of the German automaker’s annual revenues.

Its French counter part PSA Peugeot Citroen fell 3.1 percent after Exane BNP Paribas cut its target price by 4 percent and its rating to “underperform” from “neutral.”

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