MW: Europe trades sharply higher as miners, banks gain
LONDON (MarketWatch) -- European shares rose sharply on Tuesday, up for the second straight session, with a record high for gold futures boosting the mining sector and a broker upgrade helping the banking sector.
The pan-European Dow Jones Stoxx 600 index (ST:SXXP 240.63, +4.54, +1.92%) climbed 1.3% to 239.22 in a broad-based advance.
Phillip Shaw, strategist at Investec Securities, said: "People are saying that there's lots of cash floating around. It needs to find a home in this low interest-rate environment."
At the regional level, the German DAX index (DX:DAX 5,645, +136.37, +2.48%) rose 1.7% to 5,599.68, the U.K.'s FTSE 100 index (UK:UKX 5,129, +104.98, +2.09%) climbed 1.6% to 5,103.86 and the French CAC-40 index (FR:PX1 3,758, +83.39, +2.27%) advanced 1.5% to 3,730.72.
Across the Atlantic, stocks jumped higher on Wall Street. Asian shares ended Tuesday's session mostly higher. See Indications. See Asia Markets.
"Risk was back in vogue this morning, prompted in part by a surprise rise in Australian interest rates and a decline in the U.S. dollar," said strategists at RBC Capital Markets.
Australia became the first major economy to raise interest rates on Tuesday with the Reserve Bank of Australia lifting rates off 49-year lows after commodity exports helped the country come through the recent financial crisis in a better state than many. Read more on RBA rate hike.
Gold futures hit a record high of $1,038.00 an ounce on Tuesday after the U.S. dollar weakened against most major rivals following a report that Gulf oil producers, in concert with China, Russia, Japan and France are planning to eventually end dollar-based oil pricing. Read more on currencies.
Metal producers jumped in London, with mining giant Rio Tinto (UK:RIO 2,692, +129.50, +5.05%) (RTP 172.77, +6.09, +3.66%) gaining 4.2%, while Antofagasta (UK:ANTO 787.50, +41.00, +5.49%) added 5.4% and Kazakhmys (UK:KAZ 1,081, +80.00, +7.98%) rallied 7.3%. See London Markets.
"Liquidity remains in the system. It's not finding its way into consumer spending but it is finding its way into asset prices, such as commodities," said Stephen Taylor, strategist at Dolmen Stockbrokers in Dublin.
The U.K and the U.S., for example, are seen as unlikely to lift rates in the near future. "Australia is regarded as a peculiar country (in this cycle), not a lead for others," said economists at UBS.
Bank shares also were on the rise in Europe, with BNP Paribas (FR:BNP 53.87, +2.75, +5.38%) gaining 4.6%, Credit Suisse (CH:CSGN 57.80, +1.75, +3.12%) (CS 56.57, +1.59, +2.89%) adding 3% and Deutsche Bank (DE:DBK 52.64, +1.94, +3.83%) (DB 77.35, +2.51, +3.36%) trading up 3.4%.
Merrill Lynch upgraded the sector to overweight from neutral, in line with the broker's belief that earnings per share for banks bottomed in the second quarter and that "reasonable valuations offer potential for re-rating, building on strong core profitability and positive trends in key wholesale and property markets."
In Paris, shares of Societe Generale (FR:GLE 53.84, +1.64, +3.14%) rose 2% after it said that it will sell 4.8 billion euros ($7 billion) of shares so it can repay state aid and boost its capital level. See full story.
"The market seems to be taking it well," said Dolmen's Taylor of Societe Generale's move.
Societe Generale said that the proceeds will also help fund acquisitions and that it has commenced efforts to acquire the remaining 20% minority interest in Credit du Nord currently held by Dexia (BE:DEXB 6.16, +0.22, +3.77%) , shares of which rose 3.3% in Belgium.
Outside the banking sector, shares of Tesco (UK:TSCO 397.00, +5.60, +1.43%) rose 0.9% in London.
Britain's top retailer reported a 1.5% rise in first-half profit to 1.03 billion pounds ($1.6 billion) as strength in its home market and the full ownership of its bank offset write-downs, rising finance costs and weakness in Ireland and Eastern Europe. See full story.
A major gainer, shares of Norwegian oil group DNO International (NO:DNO 5.02, +1.21, +31.63%) soared 29.1%.
The company said that the Kurdistan regional government has allowed it to resume production, effective immediately. DNO's operations had been halted after the government said the disclosure of its assistance in a DNO share sale had damaged its reputation. See full story.
Bilfinger Berger (DE:GBF 50.97, +4.08, +8.70%) shares rallied 8.1% after it said it will buy MCE AG, an Austrian industrial services group, for 350 million euros ($515 million) and finance the acquisition through a capital increase. See full story.
Also trading higher, shares of French television firm TF1 (FR:TFI 11.75, +0.51, +4.49%) rose 4.4% and rival M6 (FR:MMT 17.76, +0.76, +4.47%) added 4.3%.
"Our analysis of gross advertising shows that the French TV market moved into positive territory over the summer, and that TF1 and M6 will enjoy gross revenue growth of around 10% in September," said analysts at Exane BNP Paribas.
