U.S., European bank shares rise, oil rally stalls

By Daniel Bases

NEW YORK (BestGrowthStock) – Bank shares rose on both sides of the Atlantic on Wednesday, helping drive European equities to a seven-week closing high, but gains on Wall Street were curbed as energy shares declined along with a fallback in crude oil prices.

U.S. crude oil futures prices reversed gains after a rally sparked by government data that showed gasoline supplies fell last week stalled near the $83-a-barrel level.

In the currency markets the British pound weakened after disappointing UK industrial production data, and the yen fell against most major currencies on bets the Bank of Japan will further ease monetary policy.

The U.S. dollar slumped against a basket of currencies, falling 0.12 percent at 80.499 (.DXY: ).

On Wall Street, the Dow Jones industrials fell with the decline in energy shares. Chevron (CVX.N: ) was off 1.28 percent at $73.36 while Bank of America (BAC.N: ) rose 2.02 percent to $17.14.

In midday New York trade, the Dow Jones industrial average (.DJI: ) fell 8.01 points, or 0.08 percent, at 10,556.37. The Standard & Poor’s 500 Index (.SPX: ) rose 3.17 points, or 0.28 percent, at 1,143.62. The Nasdaq Composite Index (.IXIC: ) climbed 12.42 points, or 0.53 percent, at 2,353.10.

“We’ve started to see a pick-up in M&A activity, and that represents a sign of confidence that chief executive officers and chief financial officers see better times ahead,” said Michael Sheldon, chief market strategist at RDM Financial in Westport, Connecticut.

Private equity firm Apollo Management reached a deal to acquire Citigroup Inc’s (C.N: ) real estate investment division, Bloomberg reported, sending Citi shares up 3.7 percent.

The KBW bank index (.BKX: ) was up 2.2 percent at 50.07 after earlier hitting a 52-week high of 50.60.

Abbott Laboratories (ABT.N: ) agreed to buy Facet Biotech Corp (FACT.O: ), which is jointly developing a multiple sclerosis drug, for $27 a share, topping a failed bid from Biogen Idec Inc (BIIB.O: ).

World stocks measured in the MSCI All-Country World Index (.MIWD00000PUS: ) gained 0.4 percent to 301.78, its best showing in seven weeks, and up 66 percent from a low hit one year ago.

The pan-European FTSEurofirst 300 (.FTEU3: ) index closed up 0.59 percent at 1,058.81 points. Gains in energy shares contributed to gains, rising with crude prices during the European session.

U.S. light sweet crude oil prices fell 31 cents, or 0.38 percent, to $81.18 per barrel, while spot gold turned sharply lower, losing $11.70, or 1.04 percent, to $1108.00 an ounce.

Japan’s Nikkei stock index (.N225: ) fell 0.04 percent while China’s Shanghai Composite index (.SSEC: ) lost 0.66 percent, pressured by concerns over possible monetary tightening ahead of inflation data due later this week.

YEN AND POUND WEAKEN

The Japanese yen gave up recent gains from corporate repatriation of offshore earnings amid increasing expectations the Bank of Japan will further ease monetary policy. Sources told Reuters that the Japanese central bank is leaning toward easing monetary policy again next week.

“In an environment where there is not a definite theme, the Bank of Japan looms large,” said Matthew Strauss, senior currency strategist at RBC Capital Markets in Toronto.

And “once again the market has turned very bearish on sterling, and investors are quick to pounce on any negative news from the UK.”

Sterling fell 0.40 percent to $1.4939. Britain’s manufacturing output slumped in January at its sharpest monthly rate since last August.

British Prime Minister Gordon Brown said in a speech at Thomson Reuters in Canary Wharf in London that the economy was growing, but the recovery was still in its early stages and remained fragile.

The euro rose 0.8 percent against the yen, off its session highs to trade at 123.37 while the U.S. dollar rose 0.59 percent at 90.49 yen. The euro’s gains were based more on yen weakness as the euro zone currency still carries the specter of the unresolved Greek debt crisis that limits buying enthusiasm. Against the dollar, however, the euro, was up 0.22 percent at $1.363.

Pressure has eased somewhat after Athens last week announced more austerity measures and secured 5 billion euros of debt funding from the market.

Greece’s debt problems could be seen in the credit markets, where the premium investors demand to buy U.S. debt over euro zone benchmark bunds rose to its highest level since mid-2007 on the back of recent strong safe haven flows into Bunds.

The U.S./German 10-year bond yield spread widened to 59 basis points, from around 57 basis points at midnight on Tuesday.

“The main driver in our view is the Bund yield is artificially depressed versus Treasuries because of their safe-haven status within euro govvies,” said David Schnautz, strategist at Commerzbank in Frankfurt.

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(Additional reporting by Ryan Vlastelica, Nick Olivari, Umesh Desai in Hong Kong, Dominic Lau, Tamawa Desai, Atul Prakash and George Matlock in London; Editing by Leslie Adler)

U.S., European bank shares rise, oil rally stalls