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September 13, 2010    

Lloyds leads London bankers higher after Basel Committee decision

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by Elaine Frei
Lloyds leads London bankers higher after Basel Committee decision

European equities markets were higher Monday on the news that the Basel Committee on Banking Supervision has agreed on rules stipulating the amount of equity that banks must hold in reserve in order to avoid another financial crisis, and on gains in industrial output in China.

The Chinese statistics bureau announced over the weekend that industrial production in China was up 13.9 percent in August over the same period last year while, also over the weekend, the Base Committee decided that banks must keep common equity equal to at least 7 percent of assets, that banks not meeting the requirements will not be made to raise cash to meet minimums but will also not be allowed to pay dividends, and that banks will have eight years to meet required minimums, more than the 5 years asked for by the US and the UK.

Banks were higher in London, led by Lloyds Banking Group (LSE: LLOY) with a gain of 2.82 percent, while Allied Irish Banks (ISEQ: ALBK) added 4.8 percent in Ireland on the news from Basel as well as after Spain’s Banco Santander (BMAD: SAN) said it will buy the Irish bank’s 70 percent stake in a Polish Bank for nearly $4 billion in cash.

Banks in Paris and Frankfurt were also higher as Credit Agricole (Euronext: ACA) added 5.75 percent to lead the CAC-40, Societe Generale (Euronext: GLE) was up 4.3 percent, and Commerzbank (FWB: CBK) gained 2.37 percent in Frankfurt.

The FTSE 100 was 1.16 percent higher to 5,565.53 in London, while the FTSE 250 gained 1.02 percent to 10,508.33.

Miners were mostly higher as Kazakhmys (LSE: KAZ) led gains on the 100 and in the sector as it advanced 5.21 percent, while Vedanta Resources (LSE: VED) added 3.48 percent and Antofagasta (LSE: ANTO) was 3.3 percent higher.

There were only two decliners in the mining sector as gold miner Centamin Egypt (LSE: CEY) fell 8.31 percent and Gem Diamonds (LSE: GEMD) dropped 1.01 percent.

Chipmaker CSR (LSE: CSR) was the biggest gainer on the 250 and in London generally as it added 11.05 percent after it said it would buy back as much as $50 million worth of shares.

Hansen Transmissions International (LSE: HSN) was the biggest decliner in London and led losers on the 250 as it dropped 10.17 percent, while Associated British Foods was the worst performer on the 100, falling 1.65 percent.

The FTSE Eurofirst 300 was up 0.66 percent to 1,088.2 while the IBEX added 0.71 percent to 10,765.2, the Dax was 0.75 percent higher to 6,261.68 and the CAC-40 gained 1.11 percent to 3,767.15.

There were only four losers on the Dax and only five decliners on the CAC-40.

Markets in the Asia-Pacific region were higher on data out of China that showed industrial production, retail sales and consumer prices all higher in August, according to a report from the nation’s statistics bureau.

The new figures showed that China’s industrial production was up 13.9 percent in August from August 2009, while retail sales added 18.4 percent and consumer prices gained 3.5 percent, mostly on rises in food prices.

The Nikkei 225 added 0.89 percent to 9,321.82 in Tokyo, while the Topix index was up 0.47 percent to 837.65 and the Mothers market gained 0.39 percent to 379.69.

Firms with business in China did well, including heavy machinery manufacturer Komatsu (TYO: 6301), which added 1.3 percent while industrial robots maker Fanuc (TYO: 6954) gained 1.6 percent.

Banks were also higher in Tokyo after the Basel Committee on Banking Supervision reached an agreement over the weekend on how much equity banks will need to keep on hand.

Mizuho Financial Group (TYO: 8411) was 1.5 percent higher and Mitusbishi UFJ (TYO: 8306) was up 2 percent.

South Korea’s Kospi added 0.9 percent to 1,818.86, while the Shanghai Composite was up 0.94 percent to 2,688.32 and in Australia the Sydney Ordinaries gained 1.16 percent to 4,654.2 while the S&P/ASX200 was 1.2 percent higher to 4,614.9.

The Straits Times Index was up 1.47 percent to 3,066.81 in Singapore, Hong Kong’s Hang Seng added 1.89 percent to 21,658.35, the Sensex was 1.47 percent higher to 19,208.33 in India and Taiwan’s Taiex gained 2.55 percent to 8,091.3.

New York markets were higher in midday trade, helped by the new rules on banking from the Basel Committee, with the Dow Jones Industrial Average up 0.41 percent to 10,505.45 while the S&P 500 added 0.76 percent to 1,117.94 and the Nasdaq Composite was 1.38 percent higher to 2,273.46.

Crude oil prices were higher, with West Texas Intermediate crude trading just above $77 per barrel in New York, while metals prices were also up as the jump in industrial production in China raised hopes that demand for commodities will increase.

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