European shares staged a late rally on Friday following a dismal week, helped by hopes of further measures from the European Central Bank (ECB) to ease the region’s debt crisis, while French banks recovered strongly.
BNP Paribas surged 9.8 percent and Societe Generale soared 8.8 percent, with traders citing market talk of help from the French government with some form of capital injection to bolster the banks’ balance sheets.
Spokeswomen for SocGen and BNP declined to comment.
The FTSEurofirst 300 index of top European shares ended 0.8 percent higher at 882.18 points in a choppy session during which it hit a 26-month low.
The index posted a weekly loss of 5.9 percent, its third worst weekly performance in 16 months.
“The market has had a terrible week, and this is all happening while there’s a short-selling ban on financials,” said Derek Lawless, head of WorldSpreads France.
“There’s an underlying feeling that something isn’t right in the financial system, that politicians aren’t telling the truth. We know what happened when a bank went bust, but we have no idea what’s going to be when a European state goes bust,” he added.
Earlier in the session, stocks tumbled — with the eurozone’s blue chip Euro STOXX 50 index falling by as much as 3 percent and hitting a level not seen since March 2009 — as a pledge of support from the G20 nations to shore up the financial sector failed to reassure investors.
Adding to the gloom were comments from Deutsche Bank suggesting European lenders could face a bigger-than-expected writedown on their Greek debt holdings, while talk of a Greek default intensified.
Despite Friday’s rally, the Euro STOXX 50 volatility index, Europe’s fear gauge known as the VSTOXX, rose 1.6 percent to close at 48.5.
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