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CIT rescue report boosts European markets

CIT rescue report boosts European markets
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First Published: Mon, Jul 20 2009. 05 21 PM IST
Updated: Mon, Jul 20 2009. 05 21 PM IST
London: European shares rallied on Monday after pre-weekend gains on Wall Street and earlier in Asia, boosted by reports of a rescue deal for US lender CIT, analysts said.
In late morning trading, London’s FTSE 100 index of leading shares was up 1.57% at 4,457.88 points.
Frankfurt’s DAX 30 climbed 1.55% to 5,055.53 points and the Paris CAC 40 gained 1.68% to 3,272.59 points nearing the half-way mark.
The DJ Euro Stoxx 50 index of leading eurozone shares added 1.53% to 2,507.04 points.
On the foreign exchange market, the European single currency, Euro, advanced to $1.4226.
“News of a last-minute deal to save ailing lender CIT has helped to boost index futures ... as European and Asian equities continue their recent charge higher,” said dealer Nick Mitchell at CMC Markets.
“It is rumoured that CIT will announce a $3.0 billion (€2.1 billion) deal that was reached late last night with bondholders which saved the company from bankruptcy.”
He said, “growing optimism surrounding the state of the global economy is helping to continue the recent rally in stocks and increase risk appetite.”
US media reported Monday that business lending giant CIT Group, which provides capital for small- and mid-sized businesses, has negotiated an agreement worth $3.0 billion with its bondholders to avoid bankruptcy.
Citing unnamed ‘people briefed on the matter,’ The New York Times said directors of CIT had approved a deal late on Sunday with some major bondholders to help it avert a bankruptcy filing.
“CIT is today expected to announce a rescue deal ... an expectation that has helped lift investor confidence further after positive earnings reports from the US last week,” said economist Derek Halpenny at The Bank of Tokyo-Mitsubishi UFJ in London.
In Asia, Hong Kong closed 3.7% higher at 19,502.37 points on Monday as improved economic outlooks for the US and China sent the benchmark index above the 19,000 level for the first time in 10 months, dealers said.
Financial markets in Japan were closed on Monday for a public holiday and were to reopen on Tuesday.
Before the weekend, US stocks closed mostly higher on Friday as investors digested surprisingly good earnings reports from big companies.
The Dow Jones Industrial Average rose 0.37% to 8,743.94 points, extending a blue-chip rally to a fifth straight day.
The technology-heavy Nasdaq edged up 0.08% to 1,886.61, while the broad Standard & Poor’s 500 index dipped 0.04% to 940.38.
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First Published: Mon, Jul 20 2009. 05 21 PM IST
More Topics: Markets | Shares | Stocks | FTSEuro | CIT |