Europe Markets

Europe Preview: Watching the Banks

Patrick Allen,|News Editor

The UK banking sector will remain in focus as we await details of RBS' widely anticipated rights issue and UK Chancellor Alistair Darling meets mortgage lenders to discuss how banks can help borrowers who fall into arrears.

Monday's $100 billion plan by the Bank of England to boost the sector failed to lift Libor rates and saw banking stocks fall. Darling says the plan will boost market confidence but a couple of CNBC favorites aren't so sure.

Michael Browne from Sofaer Global Research says the plan will have "no impact" and is a classic example of generals fighting previous wars like the collapse of Northern Rock. The only option for him is "print money and cut rates" if we want to see banks begin lending again.

Alchemy Partners Jon Moulton says “It’s too little" but is not "sure if it’s too late.”

RBS is likely to unveil big losses and news of a $24 billion capital injection before the market open. Broker Panmure thinks the banks stock will be remain under pressure as profits deteriate but Dresdner believes the clarity the news will bring could lift the stock and has a price target of 500 pence a share.

JP Morgan believes that RBS is not the only bank that will need to raise cash. In a note published on Monday the US bank predicted RBS and its three main rivals, HBOS, Barclays and Lloyds TSB would need to raise upto $74 billion over the coming weeks. The market is clearly now waiting for a round of kitchen sinking from the industry.

Smaller UK lender Bradford & Bingley will update on trade tomorrow with speculation mounting the buy-to-let lender could also have to raise capital. Management say they have enough cash to take them into 2009 but group is facing a slowdown from buy-to-let customers while being more dependent than bigger rivals on the money markets to raise cash.

Away from the banks we get earnings from Europe's technology sector tomorrow with Switzerland's Logitech set to report.

Logitech will be interesting with investors waiting to see if an investment in marketing will finally pay off at its ailing video unit which makes cameras for computers. Sales of keyboards and mice are expected to have been strong and as Logitech reports in dollars numbers could beat due to a weaker greenback. The CEO will join European Squawk box at 7:15 am CET.

One thing to watch out for on Tomorrow's Squawk Box will be Willie Walsh, the CEO of BA at 8:45 am CET. It is earth day and he will be in Geneva to discuss how the airline industry can become more environmentally friendly, if of course his bags are not lost at Heathrow's Terminal 5 and, like many of his customers, he arrives late.