4:00 PM Frankfurt, Germany – Stock market indexes extended gains for the second day in a row banking stocks rebounded on possible ECB purchase of Italian bad loans. Telecom sector heated up on the recent merger activity. HSBC Holdings decided to keep its headquarters in London.
Stock markets in Europe rallied for the second day in a row and banks led the rebound on the possible purchase of Italian bad bank loans by the European Central Bank, while the telecom sector received a boost from M&A activity.
The ECB is reportedly negotiating with the Italian government buying bundles of bad loans banks as part of its asset-purchase program.
Italian banks, heavily hurt by the recent selloff in the financial sector, rallied on the news.
Banca Monte dei Paschi di Siena surged 8.9%, Unipol Gruppo Finanziario soared 8.7%, Banco Popolare Societa Cooperativa added 7.7%, and Banca Popolare di Milano climbed 5.4%.
The advance in the Italian banks led financial stocks in Europe higher, with Greek Eurobank Ergasias up 30%, Dutch group ING Group rising 5.7%, and French BNP Paribas adding 2.5%.
In France, the consolidation in the telecom sector seems imminent after Orange said the merger talks between Orange and rival Bouygues are continuing.
Bouygues climbed 6.7%, Orange gained 3.1%, and Numericable-SFR surged 8.8%.
In Germany, Bundesbank lowered its 2016 inflation forecast to 0.25% from the previous estimate of 1.1%, largely on the sharp plunge in oil price.
For 2017, the German central bank trimmed its inflation forecast to 1.75% from 2%.
The inflation adjustment also raised expectations that the ECB may adjust its eurozone projections and increase the monetary stimulus.
Market indexes also received a boost after Nikkei average in Tokyo surged 7.2%.
In London, FTSE 100 index gained 129.07, or 2.26% to 5,836.67 and in Frankfurt, the DAX index added 267.66, or 2.98%, to 9,235.17.
In Paris, the CAC 40 index surged 140.42, or 3.51%, to 4,135.48.
Trading volume was lower because of the U.S. President’s Day holiday.
Electricite de France SA
dropped 2.6% to €10.16 ahead of its earnings release on Tuesday, and the French newspaper Le Figaro said the utility company is expected to report lower income.
jumped 4.8% to €66.01 ahead of its earnings announcement tomorrow.
Hennes & Mauritz AB
, better known as H&M, advanced 2.9% to 276.7 Swedish kroner after the apparel retailer said January sales rose 7% in local currency from the same month a year ago.
The number of stores increased to 3,958 at the end of January from 3,541 in the month a year ago.