Europe: Shares rise as bank and telecom stocks jump

[MILAN] European shares rose sharply for the second consecutive session on Monday, boosted by a rebound in banking stocks and French telecoms shares prompted by signs of takeover activity in the sector.

The pan-European FTSEurofirst 300 index, which rose 3 per cent on Friday, gained a further 2.9 per cent on Monday. The euro zone's blue-chip Euro STOXX 50 index rose 2.8 per cent.

The FTSEurofirst remains down around 12 per cent this year because of worries over a global economic slowdown and the health of Europe's banking sector.

But bank stocks rose on Monday as investors welcomed plans by the European Central Bank (ECB) to buy bundles of Italian bad bank loans as part of its asset-purchase programme.

The Greek stock market also climbed 7.4 per cent after the debt-ridden central government registered a primary budget surplus of 1.193 billion euros (S$1.86 billion) in January. "It's no surprise to see markets rebounding after excessive movements seen in the last few weeks," said Riccardo Ambrosetti, chairman of Italy's Ambrosetti Asset Management. "European equities have been particularly hit and we expect a faster recovery for battered financial stocks."

Italian bank Monte Paschi rose 9.2 per cent, while shares in rivals Banco Popolare and Intesa Sanpaolo climbed 7.3 per cent and 3.5 per cent respectively.

The rise in the Italian banking sector helped other financial stocks in Europe, with Dutch group ING rising 5.7 per cent and Credit Suisse up 2.7 per cent.

French telecoms shares surged on prospects of a merger between Orange and rival Bouygues Telecom. Orange, scheduled to report results on Tuesday, said talks were continuing between the two.

Shares in Bouygues Telecom parent Bouygues climbed 6.8 per cent, Orange rose 3.1 per cent while rivals Iliad and Numericable-SFR rose 4 per cent and 8 per cent respectively.

"This latest news reinforces our belief that French market consolidation will happen, and Iliad will greatly benefit from it," analysts at Bryan Garnier wrote in a note.

Traders said the mood was buoyed by ECB president Mario Draghi reiterating on Monday that the ECB was ready to act in March if inflation expectations remain weak.

Germany's Bundesbank slashed its forecast for inflation on Monday, suggesting the same will happen across the wider euro zone, which could increase pressure on the ECB to loosen money supply even further.

REUTERS