Banks lift stocks, dollar holds near 14-year peak

Banks lift stocks, dollar holds near 14-year peak. European stocks edged higher on Friday helped by banks after two regional bellwethers settled U.S. mortgage securities probes, while oil and the dollar were on the back foot in light trading ahead of the Christmas break.

In another boost to European financials, a bailout for Italy’s oldest bank Monte dei Paschi was approved as the country’s government looks to end a protracted banking crisis that has gummed up the economy.

European shares were up 0.1 percent with euro zone banks .SX7E up 0.7 percent and comfortably outperforming broader markets. An index of Italian lenders .FTIT8300 was up 1.3 percent.

While Monte dei Paschi shares were suspended from trading, Italian government bond yields fell with ten-year yields slipping 3 basis points to 1.82 percent IT10YT=TWEB.

“Banks run the show today,” said analysts at Kepler Chevreux in a note to clients, adding that the newsflow around Italian lenders was turning positive.

Deutsche Bank’s $7.2 billion settlement with the U.S. Department of Justice over toxic mortgage securities sold in the run-up to the 2008 financial crisis was nearly half of the fine initially levied in September. Deutsche Banks shares rose 4.4 percent and are up 86 percent since September lows.

Credit Suisse (CSGN.S) shares rose 0.6 percent after it agreed to pay $5.3 billion to the DOJ to settle similar charges. Barclays became the latest in a long-list of other lenders under investigation to be sued.

Elsewhere markets were quiet with UK markets closing at midday.

The dollar headed into the Christmas break on Friday just over half a percent off highs hit after this month’s U.S. Federal Reserve policy meeting.

The dollar is up more than 7 percent against a basket of currencies since lows hit on U.S. election night in November but has been flat for the past week.

The dollar index .DXY, hovering near a 14-year high, was marginally lower at 103.03 but remained within striking distance of the week’s 103.65 peak.

“My overall sense is that we’ll start the year eking out further gains from the post-Trump trends, before we get a change of tack,” said Societe Generale strategist Kit Juckes.

The euro was also a shade firmer at $1.0440 EUR=, having rebounded only modestly from a nearly 14-year low of $1.0350 set earlier in the week.

Oil prices slipped, eroding some of the gains in the previous session as traders took profits. [O/R]

Brent crude for February delivery LCOc1 dropped 19 cents, or 0.4 percent, to $54.86 a barrel after ending 1.1 percent higher on Thursday.

U.S. West Texas Intermediate crude CLc1 fell 28 cents, or 0.5 percent, to $52.67 a barrel after gaining 0.9 percent in the previous session.

 

Source – Reuters