Bank shares bolster Europe stock markets

The logo of Commerzbank on display outside a bank branch in Frankfurt. The bank’s shares yesterday  jumped by 5.5% to €13.69 after a decision by regulators to relax the Basel ruling on capital requirements for lenders.

AFP/LondonEuropean stock markets rose yesterday, with support coming from gains to banking shares after regulators relaxed rules on lender capital buffers. London’s benchmark FTSE 100 index ending the day up 0.26% at 6,757.15 points, while Frankfurt’s DAX 30 rose 0.39% to 9,510.17 points and the CAC 40 in Paris added 0.30% to 4,263.27 points. Rome climbed 0.66% and Madrid gained 0.73%. The euro dipped as traders booked profits from recent gains by the single currency. “The financial heavyweights were helped higher by a decision by regulators to relax the Basel ruling on capital requirements, giving them some welcome breathing space and hopefully a potential boost in returns,” said CMC Markets senior trader Toby Morris. Central banks have agreed to relax a key provision of reforms drafted after the global financial crisis to strengthen commercial banks. The Basel Committee, which oversees the implementation of reforms that will be applied in 27 countries, issued the amendments late on Sunday. Banking shares rallied in reaction. Commerzbank shares jumped by 5.5% to €13.69, followed by Deutsche Bank with a gain of 4.7% to €38.57. In London Royal Bank of Scotland rose 3.1% to 368 pence and Barclays advanced by 2.9% to 291.7 pence, while in France, Societe Generale added 2.2% to €44.95 and BNP Paribas finished up 1.0% to €57.95. As part of their business of lending, banks acquire more assets, or risks, than the capital they hold, and this ratio is called leverage. The Basel III reforms, which are being implemented over the coming years, require that banks limit assets to three times the amount of capital. There have been concerns that with the higher ratio, lending could be crimped. Changes proposed on Sunday allow banks to exclude much of their short-term finance operations for the purpose of calculating the ratio and only include their net positions. In foreign exchange trading, the European single currency slid to $1.3643 from $1.3663 late on Friday in New York. But the dollar fell against the yen, buying 103.34 of the Japanese currency against 104.10 on Friday. The euro rose to 83.30 British pence from 82.91 pence Friday. The British pound fell to $1.6378 from $1.6480. Gold prices rose to $1,248 an ounce from $1,227.50 on the London Bullion Market on Friday. The dollar faced further selling pressure in early exchanges after tumbling on Friday in response to official US employment figures, but later rebounded against the euro and pound. US stocks treaded water yesterday, with traders staying on the sidelines ahead of a number of banks releasing earnings reports later in the week. In midday trading, the Dow Jones Industrial Average was down 0.10% to 16,419.80 points. The broad-market S&P 500 dipped 0.07% to 1,841.06 and the tech-rich Nasdaq edged up 0.08% to 4,178.13.