London: European shares edged higher in volatile trade on Tuesday marked by a more than 20% fall for UK lender Standard Chartered after it became the latest bank embroiled in scandal.
The FTSEurofirst 300 gained just 1.08 points, or 0.1%, at 1086.87, having hit four-month highs during the previous session, supported by an expected stronger start on Wall Street.
Spanish and Italian bourses were both up by almost 1%, although they pared earlier gains, mirroring a more cautious mood on bond markets as investors await the next move by policymakers to boost global growth and save the euro.
Markets have been in risk-on mode ever since ECB President Mario Draghi said he would do ‘whatever it takes´ to save the euro but there are substantial barriers to him delivering on a plan of bold action outlined last week.
Italy’s benchmark was up 0.7% and its Spanish equivalent added 0.9%, but the STOXX50 struggled to break above the pivotal 2,400-level. Volumes were again subdued, around 37% of their 90-day average.
“The problem is that the gains over the last few days have been steep but we need more good news in order for the market to rally further from here,” said Glendevon King Asset Management manager Nicola Marinelli, adding he had been taking profits.
Denmark’s Danske Bank jumped 5.6% after it beat second-quarter profit forecasts while InterContinental , the world’s biggest hotelier, rose 4.8% after promising to return $1 billion to investors.
Beaten down Nokia gained 5.7% on speculation that the Finnish mobile phone maker could launch new smartphones in early September, helping boost its earnings outlook, before Apple unveils the next version of its iPhone.
Earnings on the whole remain mixed. Thomson Reuters StarMine data showed that about 65% of Europe’s STOXX 600 companies had reported results so far, of which 51% had met or exceeded forecasts, while the rest missed the estimates.
A major weight on the index were the banks as Standard Chartered lost nearly a quarter of its value. Brokers cut recommendations on the British bank on fears its reputation will be indelibly tarnished after New York’s top bank regulator threatened to strip it of its state banking license over financial transactions tied to Iran.
“The internal mechanics and risk management process in most of these institutions is questionable,” Christopher Clarke, hedge fund manager at Lawrence Clarke Investment Management, said. “(Positioning wise) the first thing to do is make sure you have the money in the right place and then to expect that anything is possible.”
Standard Chartered has lost a total of 29% or 450 pence over the past two days in London. That wiped around 10.5 billion sterling off its market cap.
Oriel Securities slashed its rating for StanChart by two steps to “reduce” from “buy” and traders said BofA Merrill Lynch also cut its rating for the bank to “underperform”.
Nomura said: “In the face of these risks, we cannot defend our ‘buy´ rating despite fundamental preference and as such downgrade (it) to neutral. In the near term we see downside risks from negative headlines on the topic.”
The scandal is another setback for the financial sector and comes just days after U.S. firm Knight Capital announced a $440 million trading loss caused by a software glitch that wiped out much of its capital.
Among other major fallers, Irish drugmaker Elan shed 12% after announcing it would take a non-cash charge of $117.3 million in the third quarter, following the decision to scrap further studies of intravenous Alzheimer’s disease drug bapineuzumab.