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Banks rebound after three-day fall
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U.S. inflation boosts bets of slowdown in Fed's rate hike
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Close Brothers drop on higher Novitas provision
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Rolls-Royce jumps; to build vessels for Australia's
submarine
(Updates prices to close; adds details, comments)
By Ankika Biswas and Sruthi Shankar
March 14 (Reuters) - European shares on Tuesday posted
their biggest single-day gain in nearly three months, helped by
a resilient outlook for the region's banking sector in the face
of Silicon Valley Bank's (SVB) collapse and growing optimism
over a slowdown in the Federal Reserve's rate-hiking cycle.
The pan-European STOXX 600 index closed 1.5% higher
amid a broad-based rally, rebounding from its worst three-day
selloff of 3.9% this year.
European banks rebounded 2.5% after recording their worst single-day sell-off in over a year on Monday, as U.S. regulators' moves to guarantee SVB's deposits failed to reassure investors. The index also notched its worst two-day selloff of 9.4% on Monday since the Russia-Ukraine war broke out early last year.
"The selloff (in banks) was well and truly overdone," said
Gerry Fowler, head of European equity strategy at UBS.
"The market realizes that there may well have been a path of
sentiment contagion, but the resilience of the European banking
sector is greater than people thought and the squeezing out of
positions is perhaps reversing somewhat today."
Further, Chancellor Olaf Scholz believes that Germans should
not have major concerns about the SVB fallout and that
regulators had learned lessons from the global financial crisis
in 2008.
On the data front, U.S. consumer prices rose in line with
expectations and bolstered bets of a smaller rate hike by the
Fed next week, boosting Wall Street's main indexes on Tuesday.
Investors are also keenly awaiting the European Central
Bank's interest rate hike decision on Thursday, which is
expected to be a 50-basis point. Meanwhile, Deutsche Bank sees a higher likelihood of the ECB
raising its key rate by 25 basis points, in light of the SVB
collapse.
Industrial goods spearheaded the gains among
European sector indexes, boosted by a 7% jump in Rolls-Royce and 3.3% rise in Britain's biggest defence company BAE
Systems on plans to build the vessels for
nuclear-powered attack submarines for Australia.
German arms maker Rheinmetall , Italy's Leonardo , France's Thales and Sweden's SAAB also advanced between 3% and 4.6%.
Among others, Casino soared 7.3% after the French
supermarket retailer launched a sale of shares in Brazilian
supermarket chain Assai to cut debt.
Italy's Assicurazioni Generali gained 3.6% after
the insurer surprised investors by hiking its dividend payout.
Meanwhile, Close Brothers dropped 6% to the bottom
of the STOXX 600 as higher Novitas provision weighed on its
profit.
Credit Suisse slipped 0.8% after the embattled
Swiss lender said customer "outflows stabilized to much lower
levels but had not yet reversed" in its 2022 annual report.
(Reporting by Sruthi Shankar and Ankika Biswas in Bengaluru;
Editing by Subhranshu Sahu)
