Market rally spurred by bank stress test hopes

Frankfurt stock exchange trader blowing vuvuzela during World Cup semi-final German traders can take comfort in the strong performance of stock markets

Stock markets, oil prices and the euro have gained ground for a third day, spurred on by hopes that European banks will pass EU stress tests.

The Dow Jones rose 0.5% in early trading, while European markets were up between 1% and 1.5% by mid-afternoon.

The optimism also helped the euro add to a month-long rally, nearing $1.27.

And US light crude oil rose above $75 a barrel, on hopes that the US and Europe would avoid a relapse into recession, though later slipped back.

London Brent crude also rose towards $75 a barrel.

Stocks resurgence

Lloyds Banking Group

Last Updated at 02 Oct 2014, 11:36 ET Lloyds Banking Group one month chart
price change %
75.20 p -
-1.53
-
-1.99

After three months of falling markets, many investors have taken the view this week that fears of financial stress in Europe and of a possible double-dip recession have been overdone.

The continuing bullish sentiment saw the Japanese Nikkei index close up 2.8% earlier in the day.

In Europe, bank stocks led the way up, notably UK and French firms as well as Credit Suisse and Deutsche Bank.

Most major European banks have risen strongly, some by more than 15%, over the past two days. Much of the gains came in a strong rally on Wednesday afternoon.

Bank shares jumped again at the start of trading on Thursday before falling back slightly, then surging again after lunchtime when the European Central Bank announced it was maintaining interest rates at 1%.

Societe Generale S.A.

Last Updated at 02 Oct 2014, 11:35 ET Societe Generale S.A. one month chart
price change %
38.61 -
-2.06
-
-5.05

The results of stress tests being carried out by European national authorities on 91 banks are expected on 23 July.

Market hopes are rising that most banks will either pass the tests, or be landed with relatively moderate demands to increase their capital.

However, Spanish banks Santander (which owns various UK banks such as Abbey) and BBVA failed to join in the continuing party mood on Thursday, with their shares only rising slightly.

Energy, raw materials and industrial stocks also did well, as markets bet on growing global production despite anaemic Western consumer spending.

Safe assets, such as gilts, lost value as investors switched their money into higher-yielding, more risky investments.

More on This Story

Global Economy

More Business stories

RSS

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.