London: European shares rose from the outset on Friday, led by banks and oils, and snapping a seven-session losing run, following a late rally in the United States on Thursday.
At 1002 GMT, the FTSEurofirst 300 index of top European shares was up 2.7% at 817.37 points.
“The rescue package for Bank of America will give a fillip,” said Bernard McAlinden, strategist at NCB Stockbrokers in Dublin. “And some PMIs in the US look as if they might have bottomed, and that would be significant. Markets rally when PMIs hit their lows.”
Bank of America Corp will receive $20 billion in fresh government investments and a federal backstop against $118 billion of bad assets it holds to help it absorb Merrill Lynch & Co, U.S. officials said on Friday.
The pan-European index lost more than 44% in 2008, hammered by a credit crisis that has tipped several major economies into recession. Banks have fared worse, with some collapsing and others requiring government bail-outs or takeovers.
Most banks rose on Friday, bouncing from recent weakness.
Banco Santander, Barclays, Deutsche Bank and UBS rose between 2.5% and 5.2%. But Irish banks fell further, after Anglo Irish Bank was nationalised late on Thursday. Bank of Ireland fell 14.4%; Allied Irish Banks fell 11.3%.
“There’s been another wave of the banking crisis,” said McAlinden. “There was bad lending. The problem was compounded by the sheer weakness of the economy. So now decent lending has turned bad. It’s gone full circle.”
Both Bank of America and Citigroup will report their earnings later in the day.
Dutch supermarket group Ahold was up 6.8% after reporting fourth-quarter sales of 6.6 billion euros ($8.76 billion), at the top end of forecasts as its US business continued to grow. Carrefour, the world’s second-biggest retailer, rose 1.4% despite reporting a sharp slowdown in sales after the market closed on Thursday, as shoppers across Europe and Asia cut back spending on non-essential items
Delhaize rose 7.1% after its results.
In a broad-based rally, all 38 sectors of the pan-European index were higher.
Across Europe, Britain’s FTSE 100, Germany’s DAX and France’s CAC-40 were up between 1.9% and 2.8%. Crude oil prices gained. Oil companies added most points to the index, with Total, ENI, BP, Royal Dutch Shell, and Statoil up between 2.1% and 3.6%.
Miners rose on higher metals prices. Anglo American, Antofagasta, BHP Billiton, Eurasian Natural Resources Corp., Rio Tinto and Xstrata were up between 3.3 percent and 8.3 percent.
US stocks finished higher on Thursday amid market optimism the government will act to prevent the year-long recession from deepening.
The Dow Jones industrial average added 0.2%; the Standard & Poor’s 500 Index rose 0.1%; the Nasdaq Composite Index was up 1.5%.
Futures for the Dow Jones, the S&P 500 and the Nasdaq were up between 1% and 1.3%.