Europe close: Banks gain on new Basel rules

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LONDON (ShareCast) - FTSE-100: -0.46%
Dax (Xetra: ^GDAXI - news) -30: -0.64%
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Stoxx 600: -0.47%

European equities continued to fall by close, while banking stocks soared on the decision of central bank governors to ease liquidity rules for the sector.

Banking shares reaped rewards from the announcement by Basel Committee of banking supervisors that it would give lenders more flexibility to build up cash buffers.

Barclays (LSE: BARC.L - news) and BNP Paribas (Milan: BNP.MI - news) jumped 3.72% to 287.00p and 1.96% to €45.26 respectively, while Germany's largest lender Deutsche Bank rocketed 3.1% to €35.87. France's second biggest bank gained 2.6% to €30.10.

The committee's new rules will prolong the implementation phase for the so-called liquidity coverage ratio (LCR) and expand the types of assets eligible.

The move is expected to boost the economy, but will not be enforced until 2019.

Banks in Italy and Spain are likely to benefit from lighter capital requirements as part of the move. The European countries are expected to hold their first sovereign bond auctions of the year later in the week.

The news comes ahead of this week's rate-setting meetings of the Bank of England and European Central Bank. Some analysts are, however, calling it a 'non-event' following signs of cyclical improvement and are turning their focus to Italy and Spain's auctions.

US debt ceiling

A political showdown over the US debt ceiling is seems inevitable between the Democrats and Republicans as the parties debate over how to reduce the country's deficit.

The country has raised income-tax rates on high earners as part of legislation to avoid drastic spending cuts and tax increases.

However market commentators fear the crisis is far from over with news the leaders plan to use the need to raise the government's $16.4tn debt ceiling to force President Barack Obama to accept spending cuts to entitlement programs such as Medicare.

Peugeot (Paris: FR0000121501 - news) gains on potential asset disposal plan

Peugeot gained 5% to €6.38 after a brokerage said the company was likely to announce an asset disposal plan.

Infineon Technologies (Other OTC: IFNNY - news) shares dropped 2.43% to €6.41 as Bank of America Corp downgraded it to underperform, the equivalent of a sell recommendation, from neutral.

Rolls-Royce fell 1.58% to 903.50p following reports it bribed an executive at Air China and China Eastern Airlines to obtain $2bn of deals.

Brent crude futures fall

The euro/dollar inched higher at 0.24% to the 1.3100 dollar mark.

Front month Brent crude futures fell by 0.117 dollars to the 111.180 dollar level on the ICE.

RD