Europe’s main stock markets fell back yesterday as investors booked profits from big gains last week, but bank shares surged after a top rule-setting body said it would relax its asset requirements for the sector.
Meanwhile oil prices fell yesterday as weak energy demand and concerns over more fiscal battles in Washington tempered news of growth in the US jobs market, analysts said.
New York’s main contract, light sweet crude for delivery in February shed 32 cents to $92.77 a barrel. Brent North Sea crude for February dropped 35 cents to $110.96 in London midday deals.
At the beginning of the first full trading week in 2013, London’s FTSE 100 index of leading companies lost 0.41 per cent to 6,064.58 points, Frankfurt’s DAX 30 dropped 0.56 per cent to 7,732.66 points, and in Paris the CAC 40 fell 0.68 per cent to 3,704.64 points.
The euro rose to $1.3098, which compared with $1.3067 late in New York on Friday. Gold prices slipped to $1,645.25 per ounce on the London Bullion Market, from $1,648.
“European markets have slid back from multi month highs as investors book profits ahead of the start of [the fourth quarter] earnings season in the US [and] as caution starts to outweigh the recent outbreak of bullish sentiment on the back of last week’s so-called fiscal cliff deal,” said trader Toby Morris at CMC Markets UK.
Equities had rallied sharply last week in holiday-shortened trade after US lawmakers clinched a deal to avert a much-feared “fiscal cliff” of drastic tax rises and automatic spending cuts.
“The banking sector has been the stand out performer on the back of the weekend relaxation of the latest Basel 3 requirements,” he added.
Over the weekend, the Basel Committee on Banking Supervision announced that it would give banks and financial institutions more time to meet global liquidity rules scheduled to begin in 2015.
The rules are aimed at improving the banking sector’s ability to survive any future financial crises. The Basel committee – the world’s top banking regulatory body – said it would relax the severity of new rules which will require banks to increase their holdings of assets that can be sold quickly in times of stress.
In reaction to the news, Europe’s major banking companies shot higher. Barclays soared 3.8 per cent to 287.2 pence and Lloyds Banking Group rose 1.28 per cent to 50.5 pence in London.
Across in Frankfurt, Deutsche Bank stock won 2.8 per cent to €35.77 and Commerzbank rallied 4.2 per cent to €1.58.
And in Paris, Credit Agricole advanced 3.5 per cent to 6.57 euros, BNP Paribas gained 1.9 per cent to €45.25, while Societe Generale increased 2.7 per cent to €30.13.
The Basel III standards had been initially proposed in 2010 but banks and financial institutions have since lobbied intensively to make the rules more flexible and result in lower costs for the sector.