European stock markets closed mostly flat to lower yesterday but the euro rose as investors reviewed mixed earnings from the region’s biggest banks and forecasts for a eurozone recession.
Dealers said the markets were tracking developments in Greece as lawmakers passed a historic debt write-down with private creditors, key to securing a hard-won €237-billion bailout approved by eurozone ministers on Tuesday.
In London, the benchmark FTSE 100 index of leading companies bucked the trend to gain 0.36 per cent at 5,937.89 points while in Frankfurt, the DAX 30 fell 0.50 per cent to 6,809.46 points and in Paris the CAC 40 was virtually unchanged at 3,447.31 points.
The euro climbed to $1.3311 from $1.3252 in New York late Wednesday, helped by strong business confidence data in Germany, Europe’s powerhouse economy.
US stocks fell slightly at the open after the European Commission forecast a mild recession for the eurozone this year and fresh data indicating a slow but steady improvement in the US job market was not enough to inspire investors.
However, US stocks then picked up slowly, helping Europe come off its lows.
The blue-chip Dow Jones Industrial Average gained 0.36 per cent and the tech-rich Nasdaq Composite added 0.73 per cent at around 1645 GMT.
“It’s all about bank results today and tomorrow,” said Simon Denham, head of Capital Spreads trading group in London.
“As expected, RBS has posted a loss but a much bigger one than expected (...) These figures today show just how susceptible the banking sector still is to Greece as well as general European sovereign debt and it’s not just RBS that is having the make large write downs,” Mr Denham said.
“Banks across the whole of Europe are suffering from huge write downs to their assets.”
Shares in RBS rose 5.09 per cent as investors looked more at the bank’s underlying profits. Taking into account losses due to Greece and other exceptional charges, RBS posted a net loss of £1.99 billion (€2.35 billion, $3.12 billion) for 2011, up from £1.12 billion in 2010.
A whole host of European banks published earnings yesterday. Commerzbank slumped 6.57 per cent after Germany’s second-biggest bank said the eurozone crisis and losses on its investments in Greece halved annual profits.
French bank Natixis, part of the BPCE group, saw its shares jump 8.43 per cent as 2011 net profit fell by a more modest 10 per cent.
Analysts at CM-CIC brokerage underscored “the strong resistance of the economic model” chosen by Natixis and hailed its expectations of meeting internationally agreed capital reserve levels by January 2013.
Markets also reacted to EU figures that predicted a eurozone recession throughout 2012, with a 0.3-per cent contraction seen rather than the 0.5 per cent growth estimated earlier.
European Union Economy Commissioner Olli Rehn noted the figures compared unfavourably to overall global growth expected to be 4.3 per cent this year.
Offsetting the bad data was news that German business confidence rose to a seven-month high in February as robust domestic demand helped protect the German economy against the debt crisis.
The Ifo economic institute’s closely watched business climate index beat analysts’ expectations to rise for the fourth month in a row to 109.6 points in February from 108.3 points in January.
That is the highest level since July 2011 and is a positive sign for the German economy, the biggest in the European Union.