Investors breathed a sigh of relief on Monday after Portugal prevented the collapse of one of its biggest banks, putting some life back into European stocks following last week's slide and pushing bond yields lower across the board.
Lisbon on Sunday announced a near 5 billion-euro rescue of the country's largest listed bank Banco Espirito Santo (BES.LS), preventing its collapse and potential contagion across the continent's banking sector.
This dovetailed with easing fears of higher U.S. interest rates following Friday's U.S. employment report, and eclipsed growing geopolitical concerns surrounding the Middle East and effect of Western trade sanctions on Russia.
"The market's initial reaction is that it's pretty reassuring to see Portugal moving quickly to rescue BES. Overall it eases systemic fears that had resurfaced last week," Saxo Bank sales trader Andrea Tueni said. "But it's not enough to spark a real rebound in the overall market. This is mostly a technical bounce from last week's slide and the trend remains negative for now," he said.
In early trade on Monday the FTSEurofirst 300 .FTEU3 index of leading shares was up 0.2 percent at 1,335 points, led by a 0.8 percent rise in pan-European banking stocks .SX7P.
Euro zone financials were up 1.3 percent .SX7E and Portuguese banks were up 6 percent .TRXFLDPTPBANK. Shares in BES were still suspended.
Germany's DAX rose 0.2 percent to 9,226 points .GDAXI, France's CAC 40 was up 0.5 percent at 4,223 points .FCHI and Britain's FTSE 100 index was up 0.2 percent at 6,692 .FTSE.
European shares led the losses last week as concern mounted over tension between Russia and the West, as well as the BES crisis which saw its share price plunge 50 percent on Friday alone.
It was a more mixed picture in Asia. MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS rose 0.4 percent, largely as Chinese shares continued to rally on signs that the economy was regaining momentum, but Japan's Nikkei average .N225 hit a one-week low.
The three main indices on Wall Street pointed to a higher open on Monday of around a third of one percent SPc1 DJc1 NDc1. The S&P 500 .SPX fell 2.7 percent last week, its biggest weekly decline in more than two years.
Original headline: Investors Cheer Portuguese Bank Rescue
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