Europe markets stable before Christmas; banks in focus

Europe’s stock markets were broadly stable yesterday on the last trading day before Christmas, with banks topping the agenda after huge US fines and a bailout in Italy.London closed marginally higher in a half-day session, as upwardly-revised data showed the British economy grew 0.6% in the third quarter despite Brexit jitters.In the eurozone, Frankfurt and Paris both drifted lower, but Milan jumped 1.0% on relief over a state rescue of the Monte dei Paschi di Siena (BMPS) bank.“It has been a mixed end to the year for European banks with Monte dei Paschi being forced to rely on state aid and Deutsche Bank and Credit Suisse coming to an agreement with US authorities on rather sizeable fines,” Oanda analyst Craig Erlam told AFP.“Still, banks are trading higher on the whole today boosted by the removal of considerable uncertainty in both cases, even if the outcome itself is a concern.”Deutsche Bank and Credit Suisse have agreed to pay a total of almost $12.5bn to settle disputes over the sale of mortgage-backed securities during the global financial crisis.Germany’s biggest lender has reached a $7.2bn deal to settle a case with the DoJ over its role in the subprime mortgage crisis.Credit Suisse meanwhile agreed to pay nearly $5.3bn.The DoJ said on Thursday that it was suing Barclays, accusing the British bank of massive fraud in the sale of mortgage-backed securities which contributed to the 2008 crisis.Barclays rejects the claims and says it will “vigorously defend” itself.“It’s a mixed day for banks, after...fines from the US Department of Justice came in lower than feared, and Italy’s Monte dei Paschi di Siena’s shares suspended after the inevitable admission that is does indeed require state aid,” said Russ Mould, investment director at stockbroker AJ Bell.“The US DoJ had initially pressed for a $14bn fine on Deutsche Bank for alleged mis-selling of mortgage backed-securities at the height of the housing bubble in the middle of the last decade, so the market is seeing the eventual $7.2bn penalty as a bit of a result for the German lender,” he said.“Shareholders in Credit Suisse are clearly similarly relieved, while it is possible that investors in Barclays are talking the view that any settlement may not be as punitive as feared.”In Frankfurt, Deutsche Bank shares gained 0.9% to €17.92.In Zurich, Credit Suisse initially bounced more than 2% higher before sliding into negative territory, down 1.11% at 15.16 Swiss francs.Back in London, Barclays’ share price sank 0.90% to 224.95 pence. Barclays was one of several major banks implicated in the crisis that so far have not reached settlements with US authorities over their roles in the financial meltdown.Meanwhile in Italy, the government approved a bailout plan in the early hours of Friday to rescue the country’s struggling banks, with BMPS likely the first in line.The announcement by Prime Minister Paolo Gentiloni comes after BMPS — the world’s oldest bank — said it had failed to raise €5bn ($5.2bn) from the markets to shore up its capital.The plan approved at a late-night cabinet meeting taps into the package of up to €20bn approved by parliament on Wednesday.In London, the FTSE 100 up 0.1% to 7,068.17 points; Frankfurt — DAX 30 down 0.2% to 11,433 points; Paris — CAC 40 down 0.1% to 4,832.30 points and Milan — FTSE MIB up 1.0% to 19,313 points at the close yesterday.