Eurozone Crisis: Shares In Eurozone Banks Rise Amid Talk Of Euro Rescue Package
Shares in French and German banks have risen by up to 10 per cent as traders digested a proposed three trillion euro (£2.6 trillion) rescue package for the single currency.
The plan, which is expected to be announced within days, and could be in place within weeks, would reportedly involve pumping cash in those European banks vulnerable to a Greek default, thus allowing the beleaguered country to partly default without leaving the euro.
Cutting Greek government debts by 50 per cent is also being considered, along with an increase in the European Financial Stability Fund from 440 billion euros (£382 billion) to two trillion euros (£1.7 trillion).
Fears around the sovereign debt crisis saw the FTSE tumble 5.6 per cent last week, a loss of £78 billion. The growing prospect of a controlled default on Greek debt also added to those fears, and the consensus was that financial markets would suffer another day of heavy losses on Monday.
There was a volatile start to trading on Monday as the FTSE 100 opened down around 2 per cent. By the mid-morning it had risen, and ultimately remained virtually unchanged by the end of the day.
French banks, which are particularly vulnerable to Greek debt, also rose, with BNP Paribas and Societe Generale up 8 per cent and Credit Agricole up 6.6 per cent. In Germany Allianz was up 8 per cent and Deutsche Bank 6 per cent, while in the UK Barclays rose 4.5 per cent and RBS 2.5 per cent.
In Asia markets did close down, with the Japanese Nikkei falling to its lowest level since April 2009 and losing 186 points, or 2.17 per cent. The Jakarta Composite index suffered the biggest loss, down 5.5 per cent on fears of a slowdown on global demand for oil, gas and coal.
The price of gold also fell by $100 to a low of $1,534 per ounce. Gold traded above $1,900 on September 6, but has since suffered two weeks of consistent losses.
Speaking to PA, Louise Cooper, markets analyst at BGC Partners, predicted another difficult week for the markets while details of the plan remain speculative.
"A sufficiently credible plan to solve the eurozone crisis will necessitate changes to treaties, laws, and not least the German constitution," she said.
"There will be wobbles and uncertainty at every vote and stage of political implementation. And then we have the problem that the voters in each country are unlikely to be keen on the solution and have not had the downside risks explained to them in sufficient detail. So what have we to look forward to? Continued financial uncertainty, high volatility and nervousness."
Fundamental weaknesses in consumer confidence remain too, as a new poll by Ipsos MORI revealed that just 11 per cent of Britain's think the current economic situation is good.
Americans are similarly negative, with just 14 per cent agreeing their economy was strong. Of the 26 surveyed countries only Italy (eight per cent), Ireland (seven per cent), Japan (six per cent), Spain (six per cent), Hungary (four per cent) and Greece (4 per cent) posted lower confidence ratings than the UK.
Bobby Duffy, who is managing director of Ipsos MORI, said:
"People in Britain, as in many other developed countries around the world are really worried about the shape of the economy. As bad news continues to break across the globe it is hard to see where the all important rise in consumer optimism will come from."
Meanwhile the shadow chancellor, Ed Balls, used a speech to the Labour party conference to propose a "five-point plan" of tax cuts and capital investment projects, to boost the ailing recovery.