European stocks rise, led by banks

[January 26, 2009]  LONDON (AP) -- European markets rose Monday despite a drop in Asia, with an upbeat trading report by Barclays sending its shares up a stunning 65 percent and boosting investors' confidence in the ailing banking sector.

Barclays surprised by releasing a statement showing it had made a good profit for 2008 and that it did not need any cash bailouts to stay in business. Markets had feared the bank would be next to be rescued by the state and have to give up a stake to the government.

In European morning trading, Britain's FTSE 100 was 1.5 percent higher at 4,115.04. France's CAC-40 gained 1.1 percent at 2,880.06, while Germany's DAX added 1.0 percent to 4,221.89.

Japan's Nikkei 225 fell 0.8 percent at 7,682.14 as investors braced for earnings this week from Sony, Honda and other major names. Japan was the only major Asian market open amid a slew of regional holidays.

In Europe, financial and energy stocks were the best-performing shares.

"The dust has settled after last week's heavy losses, so we're seeing a bit of a bounce, supported by some bargain-hunting," said Paul Chesterton, analyst at CMC Markets

Chesterton noted Goldman Sachs had upgraded oil stocks, such as BP, which helped buoy the wider indexes, but financial stocks "led the charge" on Barclay's good news.

Barclays shares skyrocketed after it said it expects pretax profits of over 5.3 billion pounds ($7.3 billion) for the full year 2008 despite writing down 8 billion pounds on bad assets. The bank also said it would not need any bailouts beyond some guarantees on toxic assets -- dispelling fears it was set to be part-nationalized.

The news was a breath of fresh air for the banking sector, which was braced for the worst in Britain. Also helping the sector was the news that France's Societe General SA and Credit Agricole SA will merge their asset management businesses.

Other statements by financials were less upbeat, however.

Dutch ING announced 7,000 job cuts, the resignation of its CEO and a euro3.3 billion ($4.22 billion) loss for the fourth quarter. It also said the state would take on 80 percent of a euro27.7 billion portfolio of mortgage assets in exchange for a nominal sum of euro600 million. Its shares were down 2.9 percent.

In France, BNP Paribas SA said it expects to report a euro1.4 billion net loss in the fourth quarter due to weaker investment banking, but predicts a net profit of around euro3 billion for the full year thanks to the "good performance" of retail banking and asset management. Its shares were up 11 percent.

Europe's gains looked fragile with more earnings due across all industries.

Electronics giant Philips reported a fourth-quarter loss of euro1.47 billion and said it would cut 6,000 jobs, sending its shares down 3.4 percent.

U.S. stock index futures suggested Wall Street would bounce back from Friday's losses to open higher. Dow Jones futures rose 46 points to 8,019 after the index fell 0.6 percent on Friday. The Standard & Poor's 500 futures added 4.9 points to 828.40.

In Asia, markets in Hong Kong, mainland China, South Korea, Singapore and Taiwan were closed for the Lunar New Year holidays. Australian and Indian markets were also closed for national holidays.

In Tokyo, nervous investors were in no mood to buy ahead of the expected flurry of dismal third quarter results and a worsening outlook, said Masayoshi Okamoto, head of dealing at Jujiya Securities in Tokyo.

"They're hanging back and trying to figure out what to do next," he said. "(Earnings) will likely be worse than anyone imagined, and investors know that the situation will deteriorate even further in the January-March quarter."

Sony Corp., which last week projected its first annual net loss in 14 years, fell 3.1 percent. The Japanese electronics giant reports fiscal third quarter results Thursday, followed by Honda Motor Co. on Friday.

But Nomura Holdings Inc., which reports Tuesday, managed to edge up 0.5 percent on hopes that Japan's top brokerage had finished writing off costs related to its purchase of Lehman Brothers' operations in Asia, Europe and the Middle East.

The stock rose despite weekend news reports that Nomura's October-December losses could total a worse-than-expected 300 billion yen ($3.4 billion).

Among the few stock markets open in the region, Thailand's benchmark index rose 0.7 percent and the Philippines' key index was also up 0.7 percent. New Zealand's market ended flat.

Australia's market, closed for Australia Day, will reopen Tuesday, as will trading in India, which was observing Republic Day.

Markets in Singapore and South Korea will reopen Wednesday, and Hong Kong's markets will reopen Thursday. Trading in mainland China and Taiwan will be closed all week and resume Feb. 2.

In foreign exchange, the euro traded at $1.2899 in morning European trading, down from $1.2974 in late New York trading on Friday. The dollar was also higher against the Japanese yen, at 89.28 yen from 88.76 yen Friday.

[Associated Press; By CARLO PIOVANO]

AP Business Writer Tomoki A. Hosaka in Tokyo contributed to this report.

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