Bank stocks push Europe higher

[January 28, 2009]  LONDON (AP) -- Bank stocks pushed European markets higher Wednesday, and Asian markets rallied after U.S. earnings showed companies are still scraping together profits despite the worst recession in decades.

By noon in Europe, Germany's DAX had soared 2.8 percent to 4,442.52, France's CAC 40 jumped 2.6 percent to 3,030.96, and Britain's FTSE 100 gained 2.1 percent to 4,283.3.

Wall Street futures pointed to a strong open with Dow futures up 150 points at 8,243, and S&P500 futures up 18.7 points at 858.

Confidence in the banking sector appeared to be rising, and Lloyds Banking Group PLC led the advances in London after an upgrade from Citigroup, which said the risk of nationalization of Lloyds is fully factored into the share price.

Shares in Lloyds, created by Lloyds TSB's rescue takeover of HBOS PLC earlier this month, leapt 37.9 percent to 92.5 pence ($1.30).

"Lloyds has been upgraded to 'buy' by Citigroup today, which is pushing up the rest of the banks," said Lawrence Peterman, investment director at Eden Financial in London. He added that they had also been helped by a strong performance of financials in the U.S. overnight.

Barclays was up 13.8 percent, HSBC 6.2 percent and Royal Bank of Scotland Group 12.1 percent. In Paris, BNP Paribas rose 13 percent and in Frankfurt Commerzbank added 13.3 percent.

In Asia, South Korea's benchmark Kospi jumped 5.9 percent in a catch-up rally to 1,157.98 -- led by banks and chip makers -- after being closed for holidays on Monday and Tuesday.

Japan's Nikkei 225 stock average rose 45.22 points, or 0.6 percent, to 8,106.29. Singapore's market, which also closed the previous two sessions, gained 2.5 percent and Australia's main stock measure rose 1.5 percent. Mainland China's markets are closed all week for the Lunar New Year while Hong Kong reopens Thursday.

Sentiment in Asia got a boost as profits from U.S. Steel, American Express, chip-maker Texas Instruments Inc. and movie rental company Netflix Inc. reassured investors that while the fourth quarter was generally terrible for American companies, it wasn't the disaster many had feared.

The imminent passage by the U.S. House of Representatives of a $825 billion stimulus bill which backers say could create up to 4 million jobs also lent some support to markets. The bill, which includes roughly $550 billion in spending and $275 billion in tax cuts, could be signed by President Barack Obama by mid-February.

On Tuesday, the Dow Jones industrials rose 58.70, or 0.72 percent, to 8,174.73 even as U.S consumer confidence slipped in January to its lowest level since the inception of the Conference Board's index in 1967.

The broader Standard & Poor's 500 index rose 1.1 percent to 845.71, and the Nasdaq composite index rose 1 percent to 1,504.90.

U.S. Federal Reserve policymakers wrap up a two-day meeting later Wednesday, where they are expected to leave a key interest rate at a record low to provide relief. At its previous meeting in December, the Fed took the unprecedented action of slashing its key rate from 1 percent to a new, targeted range of between zero and 0.25 percent. Economists predict the Fed will leave rates at that range through the rest of this year.

In Tokyo, Nomura Holdings Inc. fell 1.7 percent a day after reporting a record loss for the third quarter as market turmoil and the heavy burden of its global ambitions dragged Japan's biggest brokerage deeper into the red. But megabank Mitsubish UFJ Finance gained 1.2 percent ahead of quarterly earnings. After the market closed, the bank said April-December net profit plunged nearly 74 percent as a result of the global financial turmoil.

"Certainly, there is considerable nervousness about earnings, but today's rise (in the Nikkei) is basically due to the euro's climb against the yen," said Nakayuki Yamagishi, a strategist at Mitsubishi UFJ Securities in Tokyo. A weaker yen boosts profits at Japanese exporters.

Major exporters Sony Corp. and Nintendo Co. are scheduled to release quarterly results Thursday.

Banks rallied in Seoul, catching up to gains by other Asian financial stocks in the wake of British lender Barclays saying it will still book a profit for 2008 despite massive writedowns. KB Financial Group, the holding company for South Korea's largest lender, Kookmin Bank, surged 11 percent.

South Korean chip maker Samsung Electronics rallied 10.5 percent. Hynix Semiconductor vaulted the daily limit of 15 percent on hopes they will benefit from the collapse of German rival Qimonda, which recently filed for insolvency protection. Japanese memory chip maker Elpida Memory Inc. jumped 9.1 percent in Tokyo.

Oil prices were below $42 a barrel after an overnight tumble on dire economic news. Light, sweet crude for March delivery rose 18 cents to $41.76 a barrel by midday in Europe in electronic trading on the New York Mercantile Exchange.

[Associated Press; By LOUISE WATT]

Associated Press writers Stephen Wright in Bangkok, Thailand, and Tomoko A. Hosaka in Tokyo contributed to this report.

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