A look at economic developments and stock market activity around the world Monday:
LONDON – European and U.S. stock markets spiked higher after a respected banking analyst stoked hopes that this week’s earnings from some of the U.S.’s leading banks may be better than expected. The FTSE 100 index of leading British shares rose 1.8 percent to 4,202.13 while Germany’s DAX jumped 3.2 percent to 4,722.34. The CAC-40 in France gained 2.3 percent to 3,052.08.
The catalyst was analyst Meredith Whitney who told CNBC Television that she had upgraded her recommendation on U.S. investment bank Goldman Sachs Group Inc. to “buy” and raised her price target to $186 a share – a day before it reports its second-quarter earnings. Whitney, who has been viewed as bearish on the sector, also said Bank of America Corp. could be good value.
SHANGHAI – Chinese shares were mixed amid fears the year’s biggest initial public offering might depress the market by flooding it with new shares. The benchmark Shanghai Composite Index shed 1.1 percent to close at 3,080.56 while the Shenzhen Composite Index for China’s smaller second exchange edged up 0.4 percent to 1,047.07. Investors were unnerved by the weekend announcement that regulators have approved a 42.6 billion yuan ($6.2 billion) IPO by China State Construction Engineering Corp.
TOKYO – Japanese stocks fell as nervous investors frowned upon the prime minister’s decision to dissolve parliament and wait more than a month to hold elections. The benchmark Nikkei 225 stock average fell 2.6 percent to an eight-week low of 9,050.33 – closing lower for a ninth session. The broader Topix index lost 2.3 percent to 852.42. The market opened lower, but selling accelerated in the afternoon on news that Prime Minister Taro Aso will likely dissolve the powerful lower house next week, and that national elections would take place Aug. 30.
BRUSSELS – European financial supervisors would be able to fine banks that give bonuses encouraging staff to take excessive risks under new rules proposed by the European Commission. The European Union’s executive agency also suggested new capital requirements for how much banks should set aside to cover high-risk investments, including their trading book and resecuritizations that combine, slice up and repackage investments based on loans. The new rules are not likely to enter into force until late 2011 and will need the backing of the European Parliament and the EU’s 27 governments.
STOCKHOLM – The European Union is not yet ready to sign a free-trade agreement with South Korea because there could still be “outstanding questions” from some EU members, Sweden’s prime minister said. South Korea’s President Lee Myung-bak had hoped to announce the conclusion of the free-trade talks during a visit to Sweden, which currently holds the rotating six-month EU presidency. But Swedish Prime Minister Fredrik Reinfeldt suggested some EU capitals were not prepared to approve the agreement, despite a breakthrough in talks on Friday.