Europe Markets

Stocks rally 3%, Draghi 'ready to act' on euro area

Reducing equity exposure in bear markets
Reducing equity exposure in bear markets
Problems in China are ‘gargantuan’: Asset manager
Fundamental issues in China are ‘gargantuan’
Banks ‘fine-tuning’ to optimize footprint
Banks ‘fine-tuning’ to optimize footprint
OPEC to cooperate on production cuts?
OPEC to cooperate on production cuts?

European markets traded sharply higher on Monday, on remarks made by the European Central Bank Chief Mario Draghi and a recovery in banks and commodities.

The pan-European STOXX 600 ended the day closing provisionally up 3.1 percent, with London's FTSE 100 was up 2.1 percent, France's CAC 40 up around 3 percent, while Germany's DAX was around 2.7 percent up.

European markets

Investors were keeping a close eye on ECB president Mario Draghi on Monday, where he is speaking before the European Parliament. In his speech, Draghi said that the central bank is ready to ease policy in March, if market volatility or the effect of low energy prices impacts inflation expectations.

With U.S. markets closed Monday, all eyes are on markets in Europe and Asia. While most of Asia's stocks rallied Monday, China's Shenzhen Composite and Shanghai Composite closed slightly lower.

People's Bank of China (PBOC) governor Zhou Xiaochuan told Caixin financial magazine over the weekend, that he saw no basis for a continuing the depreciation of the yuan. He also dismissed speculation that Beijing would tighten capital controls to stem the surging capital outflows from the mainland.

Chinese bank staff member counting stacks of 100-yuan notes at a bank in Huaibei, China.
China’s problems ‘just gargantuan’

In the commodities space, oil prices ticked higher on speculation that OPEC could agree to cut production, to reduce supply glut. Brent was hovering around $33.60, while U.S. crude was up over 1 percent, just below $30.

The basic resources sector was in focus on Monday as copper and nickel surged higher on hopes that China's monetary authorities could enact further easing policies. ArcelorMittal and Glencore posted strong gains.

Anglo American was also trading sharply higher, despite analysts expecting a disappointing full-year earnings report on Tuesday, amid weak metal prices.

HSBC to stay in UK

In business news, global banking giant HSBC decided to keep its headquarters in the U.K., after considering Hong Kong as its new base, in the face of a referendum that could see Britain leave the European Union. Shares were in the green.

Elsewhere, French weekly Le Journal du Dimanche reported that telecoms group Orange could present a takeover of rival Bouygues as early as Tuesday, sending shares in the firms up over 4 and 6 percent respectively. This boosted France's Numericable-SFR shares by over 8 percent.

And British defense firm BAE Systems was up over 3 percent after appointing Charles Woodburn to the newly-created role of chief operating officer.

Banks surge

Europe's banks were once again in focus for investors after the sector suffered a volatile week. Italian banks Banco Popolare and Banca Monte dei Paschi di Siena — which have come under pressure recently over concerns over their bad loan portfolio — surged over 7 percent.

Credit Suisse and Societe Generale were among the other big gainers. Analysts said that much of the price movement is due to investors buying on the dip in the sector, while Italian banks have risen on reports that the European Central Bank (ECB) was in talks to buy bundles of Italian bad bank loans as part of its asset-purchase programme.

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