By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets broke a five-day
losing streak on Friday, with regional banks bouncing back after an
ugly selloff spurred by troubles at the Portuguese Espirito Santo
conglomerate.
The Stoxx Europe 600 index gained 0.4% to 337.78, trimming its
weekly slide to 2.9%. A weekly loss of that size would be the
biggest since April.
The benchmark dropped 1.1% on Thursday, when concerns about the
robustness of Espirito Santo International (ESI) sent shivers
through the European financial sector. Trading in shares of Banco
Espirito Santo SA (BES) and Espirito Santo Financial Group SA --
subsidiaries of ESI -- was halted on Thursday and remained
suspended on Friday. Read: Portugal's banking turmoil revives
darkest nightmares about Europe
BES on Friday disclosed it has an exposure of 1.18 billion euros
($1.6 billion) to the Espirito Santo conglomerate through loans and
securities, but added that its capital buffer is EUR2.1 billion
euros above the minimum regulatory level for European banks.
Portugal's PSI 20 index closed at the lowest level since October
amid the tumult on Thursday, but climbed 2.2% to 6,238.90 on
Friday.
Portuguese bonds also rebounded, with the yield on 10-year
government bond paper falling 11 basis points to 3.87%. The yield
traded close to 4% on Thursday, reflecting investor nervousness
that the Espirito Santo chaos could spread further to Portugal's
financial system.
"Portugal gave a timely reminder to markets of the presence of
risk, and the specific challenges euro-area banks pose to the
euro-area economy," UBS economist Paul Donovan said in a note. "If
markets become more volatile, that volatility can create contagion
via capital requirements for other banks."
Southern European banks also rebounded after sharp losses, with
shares of Banca Popolare di Milano Scarl up 3.4% and Banco Popular
Español SA up 2.4%. Italy's FTSE MIB index jumped 1.2% to
20,726.89, while Spain's IBEX 35 index climbed 1.2% to
10,655.30.
Imperial Tobacco Group PLC (ITYBY) rallied 3.2% in London after
the tobacco company confirmed it's in talks buy assets and brands
from Reynolds American Inc. (RAI) and Lorillard Inc. (LO).
The U.K.'s FTSE 100 index advanced 0.3% to 6,693.28. Miners
capped gains for the London benchmark as they fell with weaker
commodity prices. Shares of Randgold Resources Ltd. lost 3.4%,
Fresnillo PLC gave up 2.1% and Rio Tinto PLC (RIO) lost 1.7%.
France's CAC 40 index gained 0.6% to 4,327.12, while Germany's
DAX 30 index climbed 0.3% to 9,689.43.
In data news, annual inflation in Germany rose to 1% in June
from 0.6% in May, confirming an earlier estimate.
And in France, Bank of France figures showed the country's
current-account deficit widened in May.
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