Shares in European banks surge, bouncing back from recent sharp losses, as analysts and traders cite stronger investor appetite for risky assets on the back of Japan's aggressive monetary easing policy, a potential extension of loans to debt-stricken Ireland (OTC BB: IRLD - news) and Portugal, as well as strong demand seen at an EFSF bond auction.
Banco Santander is up 3.9 percent, BNP Paribas (Milan: BNP.MI - news) up 4 percent, Deutsche Bank (Xetra: 514000 - news) up 3 percent and UniCredit (Milan: UCG.MI - news) up 2.8 percent, while Bank of Ireland gains 3.8 percent and Portugal's Banco Espirito Santo - which had tumbled 33 percent between mid-March and early April - surges 7.7 percent.
Last Thursday, the Bank of Japan launched a massive monetary stimulus plan, prompting some investors to flee the country in search of higher returns, which is boosting European asset prices.
"Japanese quantitative easing is goosing the whole market ... There's bound to be leakage into euro assets," a London-based banks analyst says.
On the euro zone front, Ireland and Portugal should get seven more years to repay loans from the European Union to facilitate their return to full market financing, according to a recommendation from international lenders to EU policy-makers.
"(An extension) should help periphery banks in those countries massively ... but this will also give necessary backstop to Italian Spanish and French banks," a London-based trader says.
Traders also mention strong demand at the European Financial Stability Facility's (EFSF) 8 billion-euro bond auction, reassuring the market on the EFSF's ability to raise money.
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