By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets advanced on
Monday, with banks in the driver's seat, after Cyprus and its
international lenders early in the morning struck a deal to save
the country from bankruptcy.
The Stoxx Europe 600 index added 0.8% to 296.44, climbing back
after a 1.1% loss from last week.
All eyes remained on Cyprus, where the cash-strapped nation
reached a deal on bailout terms with the European Central Bank, the
European Commission and the International Monetary Fund, also
referred to as the Troika, clearing the main hurdle to secure 10
billion euros ($13 billion) in financing.
As part of the agreement, there will be a deep restructuring of
two of the largest Cypriot banks, as well as a downsizing of the
country's overall banking sector. A controversial levy on bank
deposits under EUR100,000 put forward as part of a previous bailout
proposal was scrapped in the new agreement.
The Cyprus Stock Exchange was closed for trading all of last
week, but said it would recommence as normal on Tuesday. Monday is
a public holiday in Cyprus.
"The deal may give short-term calm but it raises new potential
problems for the future as capital controls and losses on deposits
set a dangerous precedence," analysts at Danske Bank said in a
note.
"Future problems in Greece or Spain could escalate faster as
capital control and losses for deposits above EUR100,000 will now
be seen as a real possibility," they added.
Banking shares, which were among hardest hit sectors last week,
recouped on Monday.
Shares of Banca Popolare dell'Emilia Romagna Scarl rose 3.4% in
Milan, Credit Agricole SA added 2.5% in Paris and Barclays PLC
(BCS) gained 2.1%.
Among country-specific indexes, France's CAC 40 index traded
1.2% higher at 3,815.07 and Germany's DAX 30 index rose 1% to
7,988.52.
The U.K.'s FTSE 100 index added 0.7% to 5,434.41, further lifted
by Vodafone Group PLC (VOD) up 2.6%.
The Sunday Times reported that the U.K. mobile operator eyes
selling its shares in a venture with Verizon Communications Inc.
(VZ), potentially leading to a $135 billion windfall for Vodafone
and an exit from the U.S. market.
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