Banking stocks lead Europe higher

BANKING STOCKS led European equities higher yesterday, with indexes gaining in every western European market except Iceland.

Spain and Italy were among the biggest beneficiaries of yesterday’s rally, with their indexes jumping more than 6 per cent and 5 per cent respectively.

Markets in general had a strong opening yesterday morning, and encouraging US jobs figures released around lunchtime proved a “shot in the arm”, a Dublin broker said.

DUBLIN

THE ISEQ trailed the pack yesterday, adding less than 1 per cent. However, this underperformance was attributed to the fact that the index has a relatively small banking sector weighting.

Bank of Ireland surged by more than 4 per cent to 10 cent on the back of the general banking rally across Europe. However volumes in the stock were pretty light ahead of the bank holiday weekend.

Building materials giant CRH closed more than 1 per cent, or 16.5 cent, higher at €14.89. This rise came on the heels of a 13 per cent jump in the share price of US peer Eagle Materials on Thursday after releasing a strong set of results.

Packaging giant Smurfit Kappa saw a pretty active day’s trading yesterday.

The stock, whose half-year results beat expectations earlier in the month, finished about 1 per cent, or seven cent, ahead at €6.42.

Ryanair nudged slightly higher after announcing an 8 per cent improvement in July passenger numbers, and finished the session at €4.03.

LONDON

UK STOCKS climbed yesterday, extending the FTSE 100 Index’s biggest weekly gain in almost a month, led by a rebound in financial companies after Royal Bank of Scotland Group reported earnings.

The benchmark FTSE 100 rose 124.98 points, or 2.2 per cent, to 5,787.28 at the close in London, extending the gauge’s weekly advance to 2.8 per cent.

RBS rallied 5.6 per cent to 216 pence after reporting a 22 per cent decline in operating profit to £650 million as revenue from its markets unit slipped.

Barclays climbed 5.6 per cent to 171.35 pence after tumbling 3.6 per cent on Thursday.

Lloyds Banking Group rose 4.2 per cent to 30.61 pence, while HSBC Holdings gained 4.1 per cent to 560.5 pence.

Insurance companies also advanced after France’s Axa, Europe’s second-largest insurer, reported first-half operating profit that topped analyst estimates.

Aviva led gains in insurers, climbing 7.4 per cent to 306.2 pence.

International Consolidated Airlines Group paced declining shares, falling 5.2 per cent to 151 pence.

The parent company of British Airways said it will probably record a “small operating loss” for the full year following costs related to its Spanish arm Iberia.

The company had earlier said it would break even.

EUROPE

EUROPEAN STOCKS rose for a ninth week yesterday.

The Stoxx 600 rallied 2.2 per cent to 265.58 this week, its longest stretch of gains since January 2006.

Bankia, which became Spain’s third-largest lender when seven regional banks were combined, surged 33 per cent, leading gains yesterday in shares of European lenders.

Vestas jumped 11 per cent. The world’s biggest wind-turbine maker allayed investor concern that it may breach its loan covenants, leading to a default scenario.

Air France rallied 11 per cent. The company’s operating loss narrowed to €66 million from €145 million a year earlier, helped by the introduction of a €2 billion savings plan, Air France said on July 30th.

US

US STOCKS made a firm start to yesterday’s session, sending the Standard and Poor’s 500 Index rising toward the highest level since May, after data showed payrolls climbed more than forecast.

Bank of America climbed 3.8 per cent in early to $7.45 in early trade. Alcoa rose 2.4 per cent to $8.38.

Caterpillar added 2.7 per cent to $85.37.

Investors also monitored the latest developments with Knight Capital.

The shares rallied 29 per cent to $3.32 following a report the firm advised some clients it obtained a line of credit, easing concern the market maker will collapse following a $440 million loss from a software bug.

LinkedIn added 12 per cent to $104.54. The biggest professional-networking website forecast sales that topped estimates as it adds users and makes more money from recruitment services.

Facebook, which has tumbled 45 per cent since the company went public in May, rose 4.8 per cent to $21. – (Additional reporting Bloomberg)