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Market Update

Broad Advance in European Indexes, Old Mutual in 4-Part Break Up

Author: Lucy Stoeva
Last Update: 12:21 PM ET March 12 2016

4:00 PM Frankfurt, Germany – European market indexes soared in a broad rally sparked by advances in banks and resource sectors. ArcelorMittal outlined the terms for a $3 billion rights issue that aims to reduce debt. Old Mutual announced a plan to break up in four companies.

European stocks closed higher on Friday after banks advanced on the back of additional stimulus steps from the central bank in the region and energy stocks gained on volatile energy prices.

The European Central Bank said it plans to support the banking system through four rounds of funding and pay banks to lent money in an attempt to stimulate growth.

Yesterday the ECB lowered interest rates and expanded its asset purchase program, but central bank’s president Mario Draghi also said additional rate cuts are less likely.

Banco Popular Español surged 12.8%, UniCredit gained 9.5%, Credit Agricole jumped 7.7%, Intesa Sanpaolo gained 7.5%, and Deutsche Bank added 7.4%.

Energy stocks also advanced after the International Energy Agency said global oil supplies fell by 180,000 barrels per day to 96.5 million barrels per day on lower OPEC and non-OPEC output.

Brent crude futures edged up 0.9% to $40.41, while WTI crude oil gained 2.25% to $38.69.

Seadrill rose 4.5%, Royal Dutch Shell was up 2.2%, and BP increased 1.4%.

The market rally was broad; virtually all the components of the German DAX index and the French CAC 40 index recorded gains.

The FTSE 100 index gained 103.09, or 1.71%, to 6,139.79, while the DAX index advanced 332.98, or 3.51%, 9,831.13.

In Paris, the CAC 40 index surged 142.44, or 3.27%, 4,492.79.

ArcelorMittal soared 11.9% to €4.71 after the giant steel maker announced the terms for a $3 billion rights issue that aims to reduce the $15.7 billion debt.

Shareholders can receive seven new shares for each 10 they own at €2.20 per share, or at a discount of 40% to the undisturbed share price before the rights issue was announced last month.

ArcelorMittal will use the funds to reduce its net debt by 26% to $11.7 billion.

Old Mutual Plc was among few losing stocks, down 1.8% to 182 pence, after the insurer and financial services provider announced it would break up in four separate companies by the end of 2018.

The four different businesses would be a South African bank, an African insurer, a U.S. asset manager and a U.K.-based wealth manager.

Bruce Hemphill, the new CEO of the company, said the break up aims to provide more clarity for investors and to ease the situation with cross-border regulators.

Old Mutual also announced a new dividend policy and payouts have to be covered by earnings 2.5 to 3.5 times, compared with a previous range of 2 to 2.25.

The total dividend for 2015 grew 2% to 8.9 pence.

Annual pre-tax profit increased 4% to £1.7 billion in 2015 from the previous year. Excluding the exchange rate fluctuations, profit growth was 11%.

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Sources: Data collected by 123jump.com and Ticker.com from company press releases, filings and corporate websites. Market data: BATS Exchange. Inc