French banks reverse heavy losses

By Keyur Patel

European stocks recorded their worst quarterly loss since the end of 2008 but a rebound among financials lifted equities this week.

Markets surged on Monday and Tuesday after a dismal previous week, amid growing speculation that policymakers would act decisively to tackle the eurozone fiscal crisis.

However, a Financial Times report of divisions over Greece and concerns about a global economic slowdown trimmed gains. A German vote on Thursday in favour of enhancing the European financial stability facility had largely been priced into the market.

The Eurofirst was down 16.9 per cent this quarter but climbed 4.7 per cent to 923.41 over the week, up from a 26-month low.

French banks reversed recent heavy losses to end among the biggest gainers. BNP Paribas jumped 18.7 per cent to €30.05 over the week, including 14.2 per cent on Tuesday, while Crédit Agricole gained 18.3 per cent to €5.23 and Natixis climbed 12.8 per cent to €2.38.

Shares in Société Générale were volatile, soaring 16.8 per cent on Tuesday but at one point tumbling 12.5 per cent in Friday’s session, after being cut to “neutral” from “buy” by UBS. The French lender was still up 20.2 per cent to €20.00 over the week.

Raiffeisen International and Erste Group Bank , the Austrian lenders, gained 15.5 per cent to €22.16 and 12.8 per cent to €19.36 respectively over the week, shrugging off previous rumours about a downgrade of Austrian debt. Germany’s Deutsche Bank was up 13.9 per cent to €26.32 despite a 6.8 per cent drop on Friday, and Commerzbank rose 15.8 per cent to €1.90.

Italian financials also did well, but Italy paid higher yields to issue debt in a bond auction on Thursday, which followed Standard & Poor’s recent downgrade of the country’s sovereign credit rating. Intesa Sanpaolo climbed 17.8 per cent to €1.19 over the week, while UniCredit rose 17.9 per cent to €0.80.

S&P maintained its “buy” recommendation on UBS , following the resignation of its chief executive after an alleged rogue trading scandal. UBS gained 4.2 per cent over the week to SFr10.54.

Deutsche Börse also underperformed among financials, on analyst speculation that the exchange would be hit by the introduction of a financial transaction tax. Its shares fell 2.8 per cent to €37.90 this week.

Meanwhile, fears about global economic slowdown, exacerbated by data pointing to a third successive monthly contraction of China’s manufacturing sector, drove European mining and oilfield support services groups further down. French mining company Eramet shed 6.9 per cent to €104.40 over the week, while Swiss offshore driller Transocean was down 5.3 per cent to SFr44.41 and Norwegian rival SeaDrill slipped 3.5 per cent to NKr164.40.

Elsewhere, German food processor Südzucker tumbled 11.1 per cent to €21.39 over the week, having been downgraded to “hold” from “buy” by Deutsche Bank, which expressed concern about volatile sugar prices Südzucker.

Wacker Chemie , the German chemicals group, lost 6.7 per cent to €67.25. Citigroup cut its price target on Friday to €80 from €130, one week after the company’s chairman maintained that it expected sales growth of 10 per cent in 2012 and 2013.

Copyright The Financial Times Limited 2011.