European stocks rise as Citi results lift banks

Fri Jul 18, 2008 7:53am EDT

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By Patrizia Kokot

LONDON, July 18 (Reuters) - European shares rose on Friday as Citigroup's (C.N: Quote, Profile, Research, Stock Buzz) results lifted bank stocks and reassured investors worried about the impact of a global credit crunch on the financial sector. By 1143 GMT, the FTSEurofirst 300 index .FTEU of top European shares was up 1 percent at 1,157.21 points, after hitting an intra-day low of 1,133.28 points.

Citigroup, the largest U.S. bank, posted a smaller than expected $2.5 billion loss. [nN18431251]

"In an environment where sentiment is against these stocks, we're going to see a relief rally," said Jonathan Monk, senior fund manager at Aerion Fund Management.

"Despite Merrill, the sector as a whole has done better than people's worst fears," referring to Thursday's larger-than-expected loss at Merrill Lynch (MER.N: Quote, Profile, Research, Stock Buzz). [nN17199614]

The DJ Stoxx European banks index rose 4 percent, with UBS (UBSN.VX: Quote, Profile, Research, Stock Buzz) adding 6.5 percent and Royal Bank of Scotland (RBS.L: Quote, Profile, Research, Stock Buzz) soaring 10 percent.

But Stephen Pope, chief global market strategist at Cantor Fitzgerald Europe, cautioned that the impact was likely to be short-lived.

"...A loss is a loss and the space that Citi operates in with heavy end-consumer or man-in-the-street banking is going to remain on the backfoot," he said.

"We might have dodged a bullet this time...but can the trick be repeated in the next two quarters?"

Earnings news in Europe was largely confined to the Nordic countries, with Swedish Match (SWMA.ST: Quote, Profile, Research, Stock Buzz) adding 3.6 percent after the tobacco products maker released a solid set of second-quarter earnings results.

Compressor and machinery maker Atlas Copco (ATCOa.ST: Quote, Profile, Research, Stock Buzz) advanced 4.2 percent as it beat expectations with its quarterly earnings and also reassured with its outlook.

Elsewhere, Spain's Union Fenosa (UNF.MC: Quote, Profile, Research, Stock Buzz) surged 10.4 percent, following Thursday's 16 percent advance, after core shareholder ACS (ACS.MC: Quote, Profile, Research, Stock Buzz) confirmed there are several interested buyers for its 45.3-percent stake.

L'OREAL, DELHAIZE WARN

But warnings on full-year sales at French cosmetics group L'Oreal (OREP.PA: Quote, Profile, Research, Stock Buzz) and on earnings at Belgian supermarket chain Delhaize (DELB.BR: Quote, Profile, Research, Stock Buzz) put a cap on the market's gains.

L'Oreal shed 4.6 percent, while peers Henkel (HNKG_p.DE: Quote, Profile, Research, Stock Buzz), Reckitt Benckiser (RB.L: Quote, Profile, Research, Stock Buzz) and Beiersdorf (BEIG.DE: Quote, Profile, Research, Stock Buzz) also fell.