Buoyant banks help lift European shares

Mon Jan 13, 2014 4:22am EST

* FTSEurofirst 300 up 0.1 pct, Euro STOXX 50 up 0.2 pct

* Banks rally after regulators ease rule on leverage

* Peripheral markets continue to outperform

By Blaise Robinson

PARIS, Jan 13 (Reuters) - European stocks rose in early trade on Monday, adding to last week's gains, led by a rally in banking stocks after regulators agreed to ease the way that a leverage ratio is compiled to avoid squeezing financing for the global economy.

On Sunday, global banking regulators said they would ease the way the new bank rule, which is meant to rein in risky balance sheets from 2018, is compiled in order to boost lending and support the world economic recovery.

Bank of Ireland gained 2.3 percent, Deutsche Bank was up 1.9 percent and BBVA up 1.8 percent.

The STOXX euro zone bank index rose 1.2 percent, extending its gains so far this year to 7.2 percent.

"This is good news because it will give banks some breathing space. There had been concerns that high ratios would hit the banks' profitability," said David Thebault, head of quantitative sales trading at Global Equities in Paris.

"It should also remove the distortion between the way U.S. and European lenders calculate their ratios, which should benefit European banks."

At 0900 GMT, the FTSEurofirst 300 index of top European shares was up 0.1 percent at 1,322.74 points, while the euro zone's blue-chip Euro STOXX 50 index was up 0.2 percent at 3,108.92 points, both hovering a few points below 5-year highs hit recently.

German sugar refiner Suedzucker was among the top gainers around Europe, surging 7.1 percent after posting higher-than-expected quarterly results.

Around Europe, the UK's FTSE 100 index, Germany's DAX index and France's CAC 40 were all up 0.2 percent, while euro zone peripheral markets continued to outperform, with Spain's IBEX up 0.6 percent, Portugal's PSI 20 up 0.5 percent and Italy's FTSE MIB up 0.5 percent.

"The fact that euro zone assets lead the gains so far this year is a positive sign. It means that things have greatly stabilised and that the region is not a pariah for global investors as it used to be," Global Equities's Thebault said.

So far this year, the IBEX is up 4.4 percent, the PSI20 up 8.7 percent and the MIB up 3.7 percent, outpacing the broad FTSEurofirst 300 which is up 0.6 percent.

For Guillaume Dumans, co-head of research firm 2Bremans, the real test for the new year rally will come in the next few weeks when companies start to publish quarterly results.

"Market players seem quite optimistic about the earnings season, although usually Alcoa gives a good indication of the overall trend," he said.

The U.S. aluminium major last week posted a massive quarterly loss and issued an outlook for stagnant growth in global aluminum demand.

Today's European research round-up