Friday, Jun 15, 2012
By Sara Sjolin
LONDON (Dow Jones)--European stocks jumped Friday, as investors cheered reports that central bankers stand ready to soothe financial markets if weekend elections in Greece trigger further turmoil and credit freezes.
The Stoxx Europe 600 index rose 1% to 244.21, closing the week with a 0.9% gain.
In Greece, the Athens General Index jumped 1.9% to 560.26, after having soared 10.1% on Thursday following unofficial polls pointing to a victory for the pro-austerity New Democracy party.
Among individual gainers, H&M Hennes & Mauritz AB helped lift the Stoxx 600, rising 2.1%. The Swedish retailer's second-quarter sales beat market expectations.
More broadly, banks gained on hopes that central bankers will react if the Greek election on Sunday creates further financial instability or a credit crunch.
European Central Bank President Mario Draghi said in prepared statements Friday that the "Eurosystem will continue to supply liquidity to solvent banks where needed."
The Greek parliamentary election is widely perceived as a turning point in the euro-zone crisis, as the could end up leaving the currency bloc depending on the outcome.
"The costs of a potential near-term Greek exit are too high for either Greece or the euro area. A disorderly exit would likely lead to a massive run on bank deposits, a meltdown of the Greek banking system and further aggravation of Greece's large economic downturn," analysts at Barclays Research said in a note.
"For the euro area, the main cost would be contagion, which is literally incalculable because it depends in large part on 'psychological' responses to the exit. But the risks are potentially enormous."
Koen de Leus, strategist at KBC Securities, said it could be a "blood bath" for European stocks if the antiausterity Syriza party wins. Cyclical stocks like energy firms and base material companies would be especially hurt, he pointed out.
"It's a big risk to take positions ahead of the election. If Syriza wins you'll see markets going down 5% in the beginning, " he said. "But a catastrophe will be avoided because of interventions from central banks."
"I'm still hopeful for solutions, but nothing will be solved after the election. Whether New Democracy or Syriza win, the Greece problem isn't over and the country still has huge austerity measures to follow up on."
European shares shrugged off downbeat economic data from the U.S. as Wall Street also traded higher.
Also Friday, Spanish stocks rose and bond yields eased after a week in the spotlight. The IBEX 35 index took on 0.3% to 6,719.00, gaining 2.6% for the week.
Yields on 10-year Spanish government bonds fell 3 basis points to 6.87%, after inching closer to the keenly-watched 7% level on Thursday, according to electronic trading platform Tradeweb. A basis point is 1/100 of a percentage point.
In France, most stocks traded in positive territory, with Total SA, up 1.6%, and financials providing support.
Shares of Insurance firm AXA SA shot up 4.1%, while bank Société Générale SA added 5% and Credit Agricole SA gained 6.3%.
The CAC 40 index closed 1.8% higher at 3,087.62, 1.2% higher for the week. Another gainer, Carrefour SA rose 5.9%. The food retailer said it will sell its stake in its Greek unit.
German stocks also moved higher, with Commerzbank AG adding 5.7% and Deutsche Bank AG trading up 2.4%.
Frankfurt's DAX 30 index took on 1.5% at 6,229.41. On a weekly basis, the index advanced 1.6%.
In the U.K., banks benefited as Chancellor of the Exchequer George Osborne said late Thursday that the Bank of England will activate a lending program under which auctions of short-term sterling liquidity can be held at any time.
He also said the Treasury will provide inexpensive funding if banks boost lending to British households and companies.
Shares of Royal Bank of Scotland Group PLC jumped 7.9%, while Lloyds Banking Group PLC rose 5.2% and Barclays PLC added 4.2%.
London's FTSE 100 index gained 0.2% to 5,478.81, ending 0.8% higher for the week. Shares of BP PLC advanced 1.6% and Royal Dutch Shell PLC gained 0.8% on Friday
-By Sara Sjolin; 415-439-6400; AskNewswires@dowjones.com
(END) Dow Jones Newswires
June 15, 2012 12:39 ET (16:39 GMT)