European Stocks Rebound on Italian Banking Rescue Deal
European stock markets fizzed higher Monday as investors toasted news of a 17-billion-euro ($19-billion) rescue deal in Italy's long-troubled bank sector.
The Italian government has stepped in to liquidate two insolvent banks, Veneto Banca and Banca Popolare di Vicenza, averting a threat to the country's fragile banking system.
The two failing lenders' healthy assets are being sold to Intesa Sanpaolo, one of Italy's biggest banks, for a symbolic price of one euro. At the same time, "bad" or "non-performing" loans are being transferred into a so-called "bad bank."
The deal, unveiled on Sunday, is likely to cost the Italian taxpayer up to 17 billion euros.
The news was greeted with relief across trading floors, amid fears of a potential new phase on the eurozone debt crisis.
"European equity markets are higher ... as two Italian banks were rescued over the weekend," said analyst David Madden at trading firm IG.
"The deal will result in Vento Banca and Banca Popolare di Vicenza being wound down.
"There are still questions still hanging over the Italian banking sector, but for now investors are content with the continent’s financial health."
The European bank sector rebounded in response.
In Frankfurt, Commerzbank and Deutsche Bank jumped by 2.03 percent and 1.44 percent, to stand at 9.47 euros and 15.12 euros respectively.
In London, Barclays stock rallied 1.57 percent to 200.65 pence, Royal Bank of Scotland won 1.75 percent to 249.90 pence and HSBC added 1.6 percent to 691.60 pence.
- Greeted with relief -
"The Italian banking situation has long been a background concern for its European peers, the issue every now and again bubbling to the surface to spook markets," added Spreadex analyst Connor Campbell.
"The bailout, then, has been greeted with relief by the sector as a whole, even if it has sparked anger ... especially in Germany."
In Asia on Monday, energy firms rose as another increase in oil prices eroded last week's hefty losses.
However, investors are getting tetchy as U.S. President Donald Trump struggles to pass his healthcare bill, raising concerns about his economic agenda, dealers said.
Japanese stocks finished 0.10 percent higher. Tokyo-listed airbag maker Takata was suspended after the crisis-hit firm filed for bankruptcy protection.
The company faces lawsuits as well as massive costs after deadly faults in its airbags triggered the auto industry's biggest ever safety recall.
- Key figures around 1100 GMT -
London - FTSE 100: UP 0.7 percent at 7,475 points
Paris - CAC 40: UP 1.0 percent at 5,316.80
Frankfurt - DAX 30: UP 0.8 percent at 12,829
EURO STOXX 50: UP 1.0 percent at 3,223.70
Tokyo - Nikkei 225: UP 0.1 percent at 20,153.35 (close)
Hong Kong - Hang Seng: UP 0.8 percent at 25,862.49 (close)
Shanghai - Composite: UP 0.9 percent at 3,185.44 (close)
New York - Dow: DOWN less than 0.1 percent at 21,394.76 (close)
Euro/dollar: DOWN at $1.1184 from $1.1193 at 2100 GMT on Friday
Pound/dollar: UP at $1.2721 from $1.2720
Dollar/yen: UP at 111.69 yen from 111.29 yen
Oil - Brent North Sea: UP 25 cents at $45.79 per barrel
Oil - West Texas Intermediate: UP 29 cents at $43.30