Verari Financial and Investment

GLOBAL MARKETS: European Stocks Remain Positive; Banks Advance

LONDON (Dow Jones)–European stocks recovered some of Thursday’s losses, with banking shares posting strong gains Friday after Lloyds Banking Group said it expects to return to profit this year and positive sentiment on Wall Street had helped to lift confidence.

The news from Lloyds gave its shares, and the whole banking sector, a lift, particularly as Lloyds disappointed the market with its earnings last month, said Joshua Raymond, a market strategist at City Index.

“A return to profitability would be seen as a significant step in the bank’s recovery after two years of straight losses and this is why shareholders have reacted very well to the news,” he said.

By 1225 GMT, the Stoxx Europe 600 index had increased by 0.5% to 262.5. London’s FTSE 100 was 0.7% higher at 5679.6, Frankfurt’s DAX rose 0.4% to 6034.3 and Paris’s CAC-40 gained 0.4% to 3956.0.

Meanwhile, shares in Lloyds Banking Group were 9.8% higher and the pan-European Stoxx 600 banks index was up 1.0%.

The U.K.’s FTSE was also boosted by a note from Credit Suisse, which upgraded the U.K. equity market to benchmark from underweight in local currency terms, largely due to the play on sterling.

“The combination of strong earnings momentum and sterling continuing to weaken against the dollar would be enough to leave investors overweight the U.K. However, we believe that investors should only be benchmark within a hedged portfolio,” said Credit Suisse’s strategists, noting the U.K. market is defensive and no longer cheap, the gilt/bund spread is likely to rise, and risk appetite in the U.K. is higher than in Continental Europe or Japan.

Corporate news was otherwise slow Friday, with traders keeping a watchful eye on the Greek debt situation and whether the debt-laden country will eventually have to turn to the International Monetary Fund. Meanwhile, some volatility could be on the cards as options expiries hit the U.S., U.K. and German markets. “The markets tend to be a bit jumpy on Witching Days, when a combination of futures and options expire and we have already seen elements of this in the morning’s session,” said Raymond.

“With the majority of European contracts expiring before lunch time, and without any significant economic data due out either, we may see the markets drift in the afternoon towards the close,” he added.

Looking ahead to the U.S. opening, Wall Street was expected to start flat Friday. The June Dow Jones Industrial Average futures contract was almost unchanged at 10,716 while the S&P 500 futures contract was also almost flat at 1162.0.

“On balance, equities continue to grind higher on low volume. While many investors remain sceptical of the continued market rally, particularly given the pitiful trading volumes, few want to sell into it,” said David Morrison, strategist at GFT.

Earlier in Asia, shares were mixed Friday after Wall Street’s modest gains Thursday, with exporters underpinning the Tokyo market while property developers outperformed in China.

Investors appeared to be taking in their stride the renewed worries over Greece’s debt problems, which were fuelled by talk the country could seek aid from the International Monetary Fund.

Japan’s Nikkei 225 gained 0.8% while Australia’s S&P/ASX 200 closed 0.3% higher and South Korea’s Kospi Composite gained 0.6%. Hong Kong’s Hang Seng Index rose 0.2% and the Shanghai Composite extended gains to close 0.7% higher.

In the European foreign exchanges Friday, the euro resumed its decline against the dollar after falling Thursday on renewed concerns about Greece’s fiscal woes.

By 1225 GMT, the single currency was trading at $1.3542, down from $1.3608 in late New York trade Thursday, while the dollar was trading at Y90.66, up from Y90.39. Against the Swiss franc, the euro dropped to its lowest level on record.

“Lingering concerns and mixed signals as to how to resolve the Greek crisis will benefit the greenback. We favor selling the euro on… rallies, with the recent price action indicating that $1.3800-$1.3750 are good selling levels,” said Brown Brothers Harriman, in a report.

Meanwhile, spot gold was quoted at $1122.75 per troy ounce, down $4.60 from the New York close. And April Nymex crude was down 58 cents at $81.62 per barrel. The June bund futures contract was almost unchanged at 123.06.

There are no major economic releases on the calendar in either Europe or the U.S. Friday.

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Health insurance

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