Spain Unlikely To Prolong Europe Bank Aid Programme

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Credit: Reuters/Francois Lenoir LUXEMBOURG | Tue Oct 15, 2013 9:46am EDT LUXEMBOURG (Reuters) – Spain will probably bring an end to the programme of international aid for its banks on schedule this year, Economy Minister Luis de Guindos told a news conference in Luxembourg on Tuesday. Madrid turned to Europe last year for 41 billion euros ($56 billion) to help the weakest of its banks, which have been crippled by the collapse of its real estate market and resulting mass of failed loans to developers and houseowners. With the economic fortunes of Europe’s debt-ridden southern half showing signs of improving, a senior official in Brussels told Reuters last week that Spain was unlikely to seek more financial aid for the banks when the current programme runs out. “The central scenario, and the most probable one, is that on November 15 (it will be decided that) Spain’s banking programme will come to a close,” de Guindos told reporters at a meeting of European Union finance ministers. The European Central Bank and the European Commission, which backed the rescue, last month said in a review of Spanish banking reforms that the sector remained comfortably solvent, and praised its turnaround. They stressed, however, that Spain’s weak economy – set to emerge from a two-year recession by the end of the year – and a fall-off in lending still posed a risk. Like their European peers, Spanish banks also face a European review of their balance sheets early next year before the ECB takes over as supervisor. Some believe their restructured or refinanced loans could come under particular scrutiny, and that they could be told to put more cash aside to counter potential losses on these, banking sources in Madrid have said. Any capital gap that that process leaves is likely to be manageable, though smaller banks that are owned by the state are unlikely to be able to turn to the market like some of their peers. The Spanish government currently estimates that lenders will have to put aside an extra 5 billion euros in provisions to counter such losses, a source at the Economy Ministry said. “The general perception is that in Europe the banking system has not been as thoroughly cleaned up as in the United States … which is among the elements holding back economic growth in Europe,” de Guindos told the news conference, in reference to the European review of banks’ books. (Reporting by Robin Emmott and Martin Santa in Luxembourg, Sonya Dowsett, Jose Elias Rodriguez and Jesus Aguado in Madrid; Writing by Sarah White; editing by Patrick Graham) Tweet this

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Meanwhile, the White House said President Barack Obama will meet with House Democratic leaders at 3:15 p.m. Eastern. U.S. stocks rose on Monday , but traded lower on Tuesday . Asia markets closed mostly higher . German ZEW data German data further provided investors with a reason to celebrate. The ZEW sentiment survey showed that the economic expectations indicator rose further above its long-term average in October, to 52.8 points from 49.6 points in Septemberbeating economists expectations for an unchanged reading. Germanys DAX 30 index /quotes/zigman/2380246 DX:DAX +0.92% jumped 0.9% to 8,804.44, for the highest closing level on record. The U.K.s FTSE 100 index /quotes/zigman/3173262 UK:UKX +0.64% picked up 0.6% to 6,549.11, while Frances CAC 40 index /quotes/zigman/3173214 FR:PX1 +0.78% rose 0.8% to 4,256.02. Morgan Cazenove lifted the equipment-rental company to overweight from neutral. Man Group PLC /quotes/zigman/12639690 UK:EMG +6.35% rallied 6.4% after UBS added the investment firm to its most-preferred list. In the same vein, UBS added Schroders PLC /quotes/zigman/257601 UK:SDR -0.30% to its least-preferred list, sending the shares 0.3% lower. Morgan Cazenove upgraded the firm to neutral from underweight. Stora Enso Oyj /quotes/zigman/125372 FI:STERV +5.01% climbed 5% after Goldman Sachs lifted the pulp and paper firm to buy from neutral. On a more downbeat note, shares of Schindler Holding AG /quotes/zigman/6583449 CH:SCHP -5.87% slumped 5.9% after the elevator maker warned full-year profit will come in lower than previously estimated.

In European news, the Eurogroup of finance ministers from the euro zone countries met on Monday to discuss, among other topics, Greece and banking supervision. In Ireland, the government is preparing to soften its line on austerity for Tuesday’s 2014 budget proposals, despite warnings that it would be better to stick to its targets. Taoiseach (Prime Minister) Enda Kenny triumphantly declared an end to the “era of the bailout” on Saturday. He said Ireland would become the first euro zone country to exit its bailout, and it may even do so without a financing backstop from the rest of Europe. (Read More: Ireland risks long-term pain for short-term gain ) Meanwhile, the Ernst and Young ITEM Club said in a new report on Monday that the U.K. government’s “Help to Buy” mortgage guarantee scheme would lead to a rapid improvement in prospects for the housing market, and added that fears of a housing bubble were unfounded. Japan and Hong Kong were shut for public holidays on Monday. U.S bond markets were also closed for the Columbus Day holiday. Peugeot in talks to raise cash CNBC’s Stephane Pedrazzi reports on developments at Peugeot-Citroen. The stock tumbled following news the French government could take a stake in the carmaker. In stocks news, shares of French car maker Peugeot Citroen closed around 9 percent lower, after reports that the firm was ready to raise 3 billion euros ($4 billion) via a capital hike. (Read More: Peugeot stock tumbles on rights issue reports ) Dassault Systemes warned on revenue on Monday, saying it would be sharply lower than expected this year; shares in the French software maker closed provisionally 10.53 percent lower.

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It has also bounced higher off support levels at its 50-day trendline in late August as well as October, writes Gary Gordon. While the Eurozone is not entirely out of the woods, the outlook has improved to the point where some previously controversial European banking giants are poised to significantly increase their dividends. SCZ boast s a price-to-book of 2.85, dividend yield 2.75% as well as less beta volatility than the S&P 500. The current price is solidly above both a 50-day and a 200-day moving average. The 19% gains off of the June lows arent too shabby either, wrote Gordon. SCZ allocates over 49% of its combined weight to Japan and the U.K., but the ETF does have Eurozone exposure via Germany, France and Italy. The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product. @yahoofinance on Twitter, become a fan on Facebook Related Content Chart Your most recently viewed tickers will automatically show up here if you type a ticker in the “Enter symbol/company” at the bottom of this module. You need to enable your browser cookies to view your most recent quotes. Search for share prices Terms Quotes are real-time for NASDAQ, NYSE, and NYSEAmex when available.