Bank stocks up on hopes of ECB interest rate cut

Eurostoxx 50:2,083.35 (+57.32) Frankfurt DAX:5,345.56 (+149) Paris CAC:2,859.34 (+49.23)

EUROPEAN STOCKS rose for a second day yesterday, as foreign governments and central banks urged policy makers in Europe to intensify efforts to contain the region’s debt crisis following meetings with the International Monetary Fund.

Deutsche Bank led lenders higher amid speculation the European Central Bank (ECB) may cut interest rates and as executives called for a US-style Troubled Asset Relief Program in Europe.

The benchmark Stoxx Europe 600 Index added 1.9 per cent in London, rebounding from an earlier loss of 1.4 per cent, as the IMF said that euro-area countries will do whatever is necessary to end the region’s debt crisis.

“Nothing concrete has come out of the IMF meeting, but there is a lot of talk about the Europe TARP and rate cuts so that has led to optimism in some quarters,” said Ioan Smith, a director at Knight Capital Europe in London.

More than $3.5 trillion was wiped from equity values globally last week amid concern policy makers are struggling to contain a debt crisis that has Greece teetering on the edge of a default.

German chancellor Angela Merkel said euro-region leaders must erect a firewall around Greece to avert a cascade of market attacks on other European states and said expanding the powers of the region’s rescue fund, the European Financial Stability Facility, was necessary to avert contagion.

Deutsche Bank and Commerzbank rose 6.8 per cent to €24.68 and 6 per cent to €1.73 in Frankfurt, respectively.

BNP Paribas, France’s biggest bank, rallied 4 per cent to €26.32 in Paris.

Intesa Sanpaolo climbed 7 per cent to €1.08 in Milan.

Bank of America Merrill Lynch said in a report that the European Central Bank may cut interest rates by 50 basis points at its next meeting on October 6th instead of November or early 2012 following meetings with the IMF.

Dexia advanced 4.9 per cent to €1.37 after Les Echos reported the lender is ready to sell €20 billion of bond assets to continue as a viable business.

Bayer jumped 3.5 per cent to €40.81 in Frankfurt after a study showed the company’s prostate cancer drug cut death risks by 30 per cent. – (Bloomberg)