European shares set to gain after stress tests

PARIS (BestGrowthStock) – European stock index (Read more about the euro currency recovery. ) futures signaled a higher open on Monday, with stocks poised to extend last week’s rally, after the results of the region’s stress tests on banks and following strong gains on Wall Street and in Asia.

By 0625 GMT, futures for the STOXX Europe 50, for Germany’s DAX and for France’s CAC were up 0.6-0.8 percent.

Test results released after Europe’s closing bell on Friday showed only seven of 91 banks tested — five small Spanish banks, Germany’s state-rescued Hypo Real Estate (HRXGe.UL: ) and Greece’s ATEbank (AGBr.AT: ) — failed the tests, for an overall capital shortfall of $3.5 billion euros, much less than expected.

Shares of ATEbank and of more than a dozen other banks which scraped through with just over the required 6 percent of tier 1 capital ratio in the most stressful scenario are likely to come under pressure on Monday.

There were 17 banks whose ratio fell to between 6 percent and 7 percent, including Deutsche Postbank (DPBGn.DE: ), Greece’s Piraeus Bank (BOAr.AT: ), Allied Irish Banks (ALBK.I: ), Italy’s Monte dei Paschi di Siena (BMPS.MI: ) and UBI Banca (UBI.MI: ) and Spain’s Bankinter (BKT.MC: ).

Despite the overall reassuring results, doubt remains on the toughness of the tests, which took into account potential losses only on government bonds the banks physically trade and not the sovereign debt the banks plan to hold to maturity.

“Time will tell if this bit of creative accounting or sleight of hand is able to reassure the markets; however what it may do is split the European banking system into a two tier, one with the strong banks in one tier, and the weaker ones left to wither on the vine, locked out of the funding markets and dependent on the ECB,” Michael Hewson, analyst at CMC Markets, wrote in a note. Europe’s STOXX banking index (.SX7P: ) surged 4.5 percent last week ahead of the results, outpacing the broad market.

Oil major BP (BP.L: ) will also be in the spotlight after news that the beleaguered company could soon announce the departure of its Chief Executive Tony Hayward.

“Ever since Mr. Hayward told the media he wanted his life back it seems that he had been a dead man walking, and the task now begins of not only cleaning up the affected area in the gulf but also the much more arduous task of cleaning up the company’s reputation,” James Hughes, market analyst at CMC Markets, wrote in a note.

U.S. stocks (Read more about the stock market today. ) climbed on Friday, as General Electric’s (GE.N: ) raised dividend boosted investor confidence, propelling the the S&P 500 (.SPX: ) through the key 1,100 level for the first time in a month after coming close but failing four times in July.

Friday’s climb — along with other chart moves such as a key break on the index’s daily moving average convergence-divergence, or MACD — sent a bullish technical signal to investors.

COMPANY NEWS:

BP (BP.L: )

BP was expected to announce changes at the top on Monday with the anticipated departure of CEO Tony Hayward, who came under fire for his handling of the massive oil spill in the Gulf of Mexico.

SPANISH BANKS

Five of Spain’s smaller regional lenders, known as cajas, failed Europe-wide stress tests on Friday and their recapitalization will almost complete a state-funded drive to consolidate the country’s network of unlisted savings banks.

Spain’s two largest banks Santander (SAN.MC: ) and BBVA (BBVA.MC: ), saws their shares in New York rise on Friday after publication of the stress test results which showed their Tier 1 capital positions among the strongest of the European banks tested.

SANOFI-AVENTIS (SASY.PA: )

Sanofi-Aventis is sounding out biotech company Genzyme Corp (GENZ.O: ) as the French drugmaker hunts for a large acquisition, sources familiar with the matter said on Friday.

BANCO POPOLARE (BAPO.MI: )

The bank will sell non-strategic assets in the second half of 2010 to boost its capital ratio, Chief Executive Pierfrancesco Saviotti told Il Sole 24 Ore on Saturday.

VIVENDI (VIV.PA: )

Brazil’s securities regulator could fine French media company Vivendi as much as 3 billion reais ($1.7 billion) for allegedly committing fraud in its takeover of Brazilian phone company GVT, newspaper Fohla de S. Paulo said on Sunday.

REPSOL (REP.MC: )

Ecuadorean President Rafael Correa could dissolve the Andean nation’s legislature and call for new general elections after a week of heated debate in parliament over new legislation, including a new hydrocarbons law.

RECKITT BENCKISER (RB.L: )

Consumer goods group beat forecasts with a 23 percent jump in second-quarter profit (Read more your timing to make a profit.)s and held its targets after agreeing to buy Durex condom and Scholl sandal maker SSL (SSL.L: ) last week.

IBERDROLA (IBE.MC: ), GAS NATURAL (GAS.MC: ), ENDESA (ELE.MC: )

The bank of Spain and the Economy ministry are against the September plan to start issuing state-backed securities to pay power utilities the 16 billion euro difference between energy costs and electricity tariffs known as the tariff deficit, Cinco Dias reported on Monday without citing a source.

HUGO BOSS (BOSG_p.DE: )

The luxury goods maker has sealed a deal on a joint venture to be launched in the second half of this year that could help make China its third largest market, its chief financial officer was quoted as saying by Germany’s Boersen Zeitung.

FIAT (FIA.MI: )

The carmaker should keep its pledge to boost Italian car production, Italy’s labor minister told Il Messaggero on Sunday, after he summoned the company and trade unions for talks on July 28 on Fiat’s decision to move production of some of its models to Serbia.

Stock Market News

(Reporting by Blaise Robinson)

European shares set to gain after stress tests