European stocks rose for a third week, the longest streak of gains in more than 10 months, after the Obama administration’s plan to rid lenders of toxic assets spurred a rally in banks.
Barclays PLC soared 66 percent as the US Treasury said it would finance as much as US$1 trillion in purchases of distressed assets and the UK’s third-biggest bank passed stress tests conducted by the UK financial regulator. Lloyds Banking Group PLC and Commerzbank AG jumped more than 30 percent.
The Dow Jones STIOXX 600 Index advanced 2.7 percent to 177.17 last week. The measure has rebounded 12 percent since reaching a 12-year low on March 9 as US Treasury Secretary Timothy Geithner outlined plans to buy illiquid securities and loans that have caused credit to dry up.
“The market right now is ready to give him the benefit of the doubt,” said Monika Rosen, head of research at Bank of Austria Asset Management in Vienna, which oversees about US$41 billion. “We are getting more substance but we still want to see a little more fundamental news.”
National benchmark indexes climbed in 14 out of 18 western European markets. The UK’s FTSE 100 rose 1.5 percent, while France’s CAC 40 advanced 1.8 percent. German’s DAX added 3.3 percent as Volkswagen AG surged.
European banks have led a 21-month market rout as they notched up more than US$380 billion in credit losses and writedowns, contributing to worldwide losses of more than IS$1.2 trillion. The US Treasury’s proposal to remove toxic assets from balance sheets will use between US$75 billion and US$100 billion from the US$700 billion Troubled Asset Relief Program enacted last year, giving the government “purchasing power” of US$500 billion. The Treasury said the program could double “over time.”
Barclays soared 66 percent on optimism the bank may not need to raise additional capital after it passed the Financial Services Authority’s tests.
Barclays has asked bidders to submit offers for its iShares exchange-traded funds business by Friday. The unit could be valued at as much as £4.5 billion (US$6.5 billion), said Jonathan Pierce, an analyst at Credit Suisse Group AG in London.
Lloyds surged 38 percent as the UK’s biggest mortgage lender this week offered to exchange more than £7.5 billion in bonds into senior unsecured debt to boost its financial strength.
Commerzbank, the second-largest German lender, jumped 63 percent as supervisory Board Chairman Klaus-Peter Mueller said he doesn’t expect the German government to raise its stake after agreeing to buy a holding as part of an earlier rescue plan.
Larger rival Deutsche Bank AG also advanced, rising 16 percent. Chief executive officer Josef Ackermann said Germany’s biggest bank had a good start to this year and is expected to return to profit after scaling back risky businesses and shedding toxic assets.
Volkswagen soared 19 percent as part-owner Porsche SE refinanced a 10 billion euro (US$13.3 billion) loan, spurring speculation the sports-car maker will increase its stake.
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