Banks Boost European Shares, Offset Fall in Oils
European shares ended flat on Monday after a three-day losing streak as a bounce-back in financial stocks, which have borne the brunt of the global liquidity crisis, offset a fall in energy shares.
Financials were the top gainers in Europe as Barclays rallied after the bank quashed speculation of large writedowns on Friday, helping to boost rival shares such as Royal Bank of Scotland.
UK insurer Standard Life was a top gainer in London after bowing out of a takeover battle for rival Resolution.
The FTSEurofirst 300 ended the day up 0.05 percent at 1,512.36 points after earlier falling as much as 0.7 percent to its lowest in eight weeks.
The index is on track for a 5 percent fall this month, making it its worst monthly performance since January 2003 as losses related to the U.S. subprime mortgage crisis mount at institutions around the globe, hitting investor confidence.
"I certainly think after the last week or two, there's room for a technical bounce in the market just because the mood appeared to have become bleaker than the real world," said Andrew Bell, European strategist at Rensburg Sheppards Investment Management.
"But whether that turns into a recovery depends on whether the banks and other participants can shine a torch into the spider-infested corners of their balance sheets," he said.
The DJ Stoxx banking sector index rose 2.7 percent after tumbling a total of 12 percent in seven straight sessions as losses stemming from the global liquidity crunch mounted around the world.
Barclays, Royal Bank of Scotland and UBS rose between 4 and 9 percent.
"Given how far we've fallen, I think it's understandable that investors in the short term are nervous," said Henk Potts of Barclays Wealth.
"Financial institutions have said they're taking a charge now, there's a possibility of further write-downs to come and that is when you start to get the uncertainty in the market," he said, adding: "The market hates uncertainty more than war or famine."
The fall in U.S. crude futures to just above $94 a barrel dragged down stocks in major oil companies such as BP and Total, which were down between 1.4 and 2 percent, putting them among the top ten negative weights on the FTSEurofirst 300.
The FTSEurofirst is still up about 2 percent so far this year, helped from lows hit in August by U.S. interest rate cuts.
Morgan Stanley said the risks to global growth from the fallout in the financial markets had prompted the bank to cut its equities holding to neutral from overweight.
"We do not wish to bet against the growth spillover effects of the financial crisis anymore," it said in a note.
London's FTSE 100 index was up 0.5 percent, boosted by Standard Life and the banks.
Leading the decliners was copper miner Antofagasta which fell 6 percent as copper prices dropped nearly 1 percent, while Anglo American shed 4.5 percent. Takeover target Rio Tinto gained 0.6 percent as miner BHP Billiton detailed plans to acquire it. BHP fell 1.3 percent.