Banks drive rally in European shares after Fed cut
European shares rose in early trade on Wednesday, led by BNP Paribas, which rose nearly 7 per cent after saying it would not bid for rival Societe Generale.
Banks were the top performing sector early in Europe, buoyed also by another rate cut by the Federal Reserve on Wednesday and by relief that two Wall Street heavyweights, Goldman Sachs and Lehman Brothers, did not fare as badly as feared in the first quarter of the year.
BNP Paribas was up 6.6 percent, while UBS rose 5.5 percent and Credit Suisse rose 4.4 per cent. SocGen shares lost 4 per cent.
By 0809 GMT the FTSEurofirst 300 index of top European shares was up 1 per cent at 1,254.80 points. Advancing issues outnumbered decliners by about eight to one.
"Keep in mind that the effectiveness of rate cuts by the Fed currently is reduced because the monetary transmission mechanism is not functioning as normal," said Arthur van Slooten, a strategist at Societe Generale in Paris.
"So it's not a rate cut in itself, that is not the main thing that will get us out of this liquidity crisis, but obviously yesterday's news is good."
Limiting gains on the broader market was a drop in tech shares, triggered by Ericsson, which lost more than 5 per cent after its joint venture, Sony Ericsson, said slower growth in its European market would hit its first-quarter sales. Tech stocks fell 1.4 per cent. (Reuters)
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