European bank shares rose, on course for their biggest four-day gain this year, on optimism European Central Bank President Mario Draghi will find support for plans to ease the region’s debt crisis.
Credit Agricole SA (ACA), France’s third-biggest bank, rose as much as 6.3 percent, while Spain’s Bankia (BKIA) group jumped as much as 7 percent and Italy’s largest banks, UniCredit (UCG) SpA and Intesa Sanpaolo SpA (ISP), climbed more than 5 percent. The 46-company Stoxx 600 Banks Index (SX7P) is on course for a four-day gain of 10 percent, the most since December.
“It’s a continuation of the relief rally that started last week on optimism Draghi and Europe will try to limit the increase of yields on Spanish and Italian bonds,” said Benoit Petrarque, an analyst at Kepler Capital Markets. “Current risk perception on Spain and Italy is an incentive for banks to cut cross-border exposures in those countries and the ECB feels the urgency.”
Draghi pledged last week to do whatever it takes to preserve the euro, comments that were backed by leaders in Berlin, Paris and Rome. His proposal involves Europe’s rescue fund buying government bonds on the primary market, buttressed by ECB purchases on the secondary market to ensure transmission of its record-low interest rates, two central bank officials said July 27 on condition of anonymity.
Draghi meets with U.S. Treasury Secretary Timothy Geithner in Frankfurt today and is also trying to win over Bundesbank President Jens Weidmann, a critic of ECB bond purchases.
Spanish bonds extended a rally today while the yield on the Italian 10-year bond rose after the nation sold debt.
“The fundamental picture will be hard to change,” said Petrarque, who is based in Paris and Amsterdam.
Bankia, which became Spain’s third-largest lender when seven regional banks were combined, rose 5.8 percent to 73.6 cents by 1:41 p.m. in Madrid. Credit Agricole added 5 percent to 3.51 euros in Paris. UniCredit advanced 4.3 percent to 2.8 euros in Milan, while Intesa Sanpaolo climbed 5.7 percent to 1.05 euros ($1.29).
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