By Sarah Jones - Sep 26, 2011 5:21 PM GMT+0700
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A trader speaks in front of a display for the DAX index at the Frankfurt Stock Exchange in Frankfurt, Germany. Photographer: Wolfgang von Brauchitsch/Bloomberg
Sept. 26 (Bloomberg) -- Paul Hickey, co-founder of Bespoke Investment Group, talks about the outlook for U.S. markets, commodities, and Europe's debt crisis. Hickey speaks with Deirdre Bolton and Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)
Sept. 26 (Bloomberg) -- Bob Parker, senior adviser at Credit Suisse Asset Management, talks about investment strategy as European policymakers struggle to contain the region’s debt crisis. He speaks with Owen Thomas on Bloomberg Television's "Countdown." (Source: Bloomberg)
European stocks gained, erasing earlier losses, as finance ministers and central bankers urged policy makers in Europe to intensify efforts to contain the region’s debt crisis. U.S. futures rose while Asian shares fell.
BNP Paribas SA led a rebound in banks amid speculation the European Central Bank may cut interest rates next month. Dexia SA jumped 7.6 percent amid report the lender is ready to sell 20 billion euros ($27 billion) of bond assets and that a split of the bank is under consideration.
The benchmark Stoxx Europe 600 Index rallied 1.8 percent to 220.13 at 11:20 a.m. in London, rebounding from an earlier loss of 1.4 percent. Modeling a European financial rescue after the U.S. Treasury Department’s Troubled Asset Relief Program, which started injecting capital into banks in 2008, “would be a good solution,” Goldman Sachs Group Inc. President Gary D. Cohn said at a panel discussion with other bank executives yesterday. The debate coincided with a weekend meeting of the International Monetary Fund.
“Nothing concrete has come out of the IMF meeting, but there is a lot of talk about the Europe TARP and rate cuts so that has led to optimism in some quarters,” said Ioan Smith, a director at Knight Capital Europe Ltd. in London. “I still think there is a long way to go. Nobody wants to be too long this market.”
U.S., Asian Shares
Futures on the Standard & Poor’s 500 Index gained 0.8 percent today, while the MSCI Asia Pacific Index sank 2.4 percent to the lowest since May 2010.
U.S. Treasury Secretary Timothy F. Geithner warned at the annual meeting of the IMF failure to combat the Greek-led turmoil threatened “cascading default, bank runs and catastrophic risk.”
German Chancellor Angela Merkel said euro-region leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states that would risk breaking up the currency area.
Expanding the powers of the region’s rescue fund, the European Financial Stability Facility, as agreed by European leaders in July is necessary to avoid Greece’s problems from spilling over to other countries, Merkel said late yesterday on ARD television. The fund’s permanent successor, due to take effect in mid-2013, is needed “so we can in fact let a state go insolvent” if it can’t pay its bills, she said.
EFSF Debate
Policy makers can make the EFSF more “efficient” by leveraging it without involving the ECB, German Finance Minister Wolfgang Schaeuble said over the weekend. He also raised the prospect of bringing in the permanent backstop before 2013.
Bank of Canada Governor Mark Carney estimated 1 trillion euros ($1.3 trillion) may have to be deployed while U.K. Chancellor of the Exchequer George Osborne said a solution is needed by the time that Group of 20 leaders meet in Cannes, France, on Nov. 3-4.
More than $3.5 trillion was wiped from equity values last week, driving the MSCI All-Country World Index of 45 nations into a bear market as speculation grew that policy makers are struggling to contain a debt crisis that has engulfed Europe and has Greece teetering on the edge of a default.
The benchmark Stoxx Europe 600 Index has tumbled 26 percent from this year’s high on Feb. 17, leaving the gauge trading at about 9 times the estimated earnings of its companies, near the lowest valuation since March 2009, Bloomberg Data shows.
BNP Climbs
BNP Paribas, France’s biggest bank, rallied 8 percent to 27.34 euros. Intesa Sanpaolo SpA climbed 8.2 percent to 1.09 euros in Milan and Commerzbank AG advanced 7.6 percent to 1.76 euros in Frankfurt.
BofA Merrill Lynch said in a report to clients that the ECB may lower interest rates by 50 basis points at its next meeting on Oct. 6 instead of November or early 2012 following meetings with the IMF. ECB Governing Council member Ewald Nowotny said in an interview with Market News International that he cannot exclude that the bank will lower its benchmark interest rate, while Yves Mersch said speculation about a 50 basis-point interest-rate cut is unfounded.
Dexia surged 7.6 percent to 1.41 euros after Les Echos reported the lender is ready to sell 20 billion euros of bond assets to continue as a viable business. The newspaper cited an unidentified person close to the matter.
The bank yesterday denied reports in the French press that a split of the bank is under consideration. Le Figaro said that Dexia shareholders La Banque Postale and state-owned Caisse des Depots et Consignations are working to form a new lender to French municipalities, with Dexia as an investor.
Dexia Tie Up
“The long-running rumour of a tie-up between Dexia and CDC and La Banque Postale to create a joint venture for the financing of local authorities has re-emerged as concerns over the solvency and liquidity of banks, notably French banks, have grown,” Alex Koagne, an analyst at Natixis, wrote today.
Kloeckner & Co. SE fell 5.7 percent to 9.07 euros. The German steel trader is expecting a weak third quarter due to lower orders and isn’t likely to reach its earning goals for 2011, Deutsches Anleger Fernsehen reported, citing Chief Executive Officer Gisbert Ruehl in an interview.
To contact the reporter on this story: Sarah Jones in London at sjones35@bloomberg.net
To contact the editor responsible for this story: Andrew Rummer at arummer@bloomberg.net
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