Commerzbank boosts European shares off of 2-1/2 year lows

[LONDON] European shares rebounded strongly from the previous session's steep losses on Friday, with positive results from Commerzbank and a rally in oil prices helping banks and commodity-related stocks to regain ground.

The pan-European FTSEurofirst 300 was up 2 per cent at 1,218.97, having closed down 3.7 per cent on Thursday, when a slump in banks and resource-related stocks pushed the index to a 2-1/2 year low.

Banks were in favour with Commerzbank up 14 per cent after it returned to profit in the fourth quarter. Provisions for bad loans fell, allowing the bank to draw a line under a six-year restructuring by announcing it was closing its 'bad bank' comprising non-core assets.

In all, the STOXX 600 Banks index rose 3.8 per cent.

"There's a sense of relief. There's so much nervousness in the market at the moment that even slightly good news out of a bank like Commerzbank is taken very well," said Mark Priest, sales trader at ETX Capital.

"The German banking sector has been pretty battered, and it's got to a point where there may be value there, so long as global economic factors start to calm down."

Germany's DAX was up 1.4 per cent. Traders said that growth data from Germany, which showed growth was steady and in line with expectations, provided reassurance after economic fears had pegged back markets this week.

The FTSEurofirst 300 nonetheless remains down five per cent this week, with banks still down around 7.5 per cent on the week, hit by concerns over profitability in a low growth, low interest rate environment.

Caution over exposure to default from the energy sector has also hindered bank stocks. On Friday, the oil and gas sector rose 3.1 per cent after a rally in oil which left crude prices up over three per cent.

Growth sensitive mining stocks also rallied, up over three per cent.

In other corporate news, Rolls Royce rallied 11.9 per cent after its results, its biggest one-day rise since November 2008.

It stuck to its 2016 guidance, despite being forced to cut its dividend following three profit warnings last year. It said there would be no need for a rights issue.

"It has... been able to leave guidance unchanged, breaking away from that slew of profit warnings we've seen of late," said Tony Cross, market analyst at Trustnet Direct, who added that the dividend cut was a "bold" move.

"This really does have the feel that management is attempting to draw a line under recent events."

REUTERS