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European shares steady as Banco Popular cash call hits banks

European shares steady as Banco Popular cash call hits banks

MILAN/LONDON: European shares steadied on Thursday, with banks coming under pressure after a surprise rights issue by Spain’s Banco Popular fuelled fears others in the region may follow to strengthen their balance sheets.

The pan-European STOXX Europe 600 was little changed by 1433 GMT, while the FTSEurofirst 300 added 0.1 percent. Both hit a four-week high in the previous session, helped by a two-day rally in banking stocks.

Europe’s banking sector index gave up part of those gains, falling 0.7 percent after Banco Popular announced a 2.5 billion euro cash call, which caught some investors by surprise. Its shares fell 25 percent.

“This is creating downward pressure across the rest of the sector for the main banks,” Citi said in a note for clients.

Speculation about potential capital hikes weighed particularly on Spanish and Italian banks with Caixabank , Sabadell, UBI and UniCredit all down by more than 4 percent.

Guardian Stockbrokers director of trading Atif Latif said the Banco Popular rights issue suggested euro zone banks were still a major concern.

“Credit risk concerns, lack of credible asset quality, balance sheet issues and a lack of reserves… all this makes for gloomy reading for those with EU bank exposure,” he said.

The STOXX 600 Basic Resources index was the top sectoral riser, up 1.5 percent as miners benefited from a rise in the price of copper.

ArcelorMittal, the world’s largest producer of steel, was the biggest gainer in the sector and the broader STOXX Europe 600 index with a rise of more than 7 percent.

Goldman Sachs raised its target price on the stock, and maintained its “conviction list buy” recommendation.

Oil companies came off earlier highs as Brent crude slightly pulled back after earlier breaking above $50 a barrel for the first time in nearly seven months as a global supply glut showed signs of easing. The sector index was last flat.

Newspaper group Daily Mail and General Trust fell 12 percent after it said a print advertising downturn was squeezing margins in its media business, resulting in an 11 percent drop in first-half profit and a lower outlook.

Copyright Reuters, 2016

Courtesy : BRecorder



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