European stocks soared Thursday, making a comeback from recent lows and shrugging off news of fraud that caused French bank Societe Generale billions of euros in losses.
Markets were buoyed by strong earnings results from Nokia and Allianz and a government plan to bail out U.S. bond insurers that could prevent billions more in losses due to the financial meltdown.
"The key story here is the bond insurers story," said Edmund Shing, strategist at BNP Paribas in Paris told Reuters.
"It would be logical that U.S. and European banks would coordinate with regulators in the United States to help bail out these insurers, because if these guys would fail, it would be much more catastrophic for banks' balance sheets and we would see another round of write-downs."
Shares were also held up by growing confidence that more interest rate cuts from the Federal Reserve could help stabilize the economy and support the banking sector, which was one of the best performers at the market open.
The banking and financial service sector surged, with shares in HBOS gaining 9.7 percent, Barclays up 8.1 percent, Dexia up 8.7 percent, and Allianz up more than 8 percent.
Societe Generale's shares fell 4.6 percent after they resumed trading, after the bank reported it uncovered a “fraud” by one of its traders that would have a 4.9-billion-euro ($7.16 billion) negative impact on the company.
The board of the bank rejected CEO Daniel Bouton’s resignation as it seeks to raise money to cover the losses. Separately, the bank also announced it will be writing down a further 2 billion euros on subprime losses.
SocGen held a press conference at 10 am London time.
The French bank’s rival BNP Paribas saw shares rise by 8.3 percent after it said it saw no exceptional loss or item in its 2007 accounts which would justify a warning like SocGen’s.
BNP said it would publish preliminary results next week, before its formal full-year earnings on Feb. 20.
In other corporate news, French retail-to-luxury company PPR reported a 15 percent jump in fourth-quarter revenue, boosted by its new acquisition of Puma as well as luxury sales. The company also reiterated its full-year outlooks for 2007 and 2008. Shares rose by more than 8 percent.
Nokia beat analysts' expectations with a 57 percent rise in its 9-month earnings per share. Strong demand in the emerging markets boosted its global market share by 40 percent. Shares rose 11.5 percent.
Siemens delivered better-than-expected first-quarter operating profit as 3 of 4 units surprise with strong growth. Management said they will grow twice as quickly as the global economy this year. Shares jumped by more than 4 percent.
Meanwhile, fears of a subprime writedown from Allianz eased after the insurer said it hit its 2007 profit targets despite the credit turmoil in the fourth quarter.