EUROPE MARKETS: European Stocks Rise As ECB Mulls Tiered Rates; Deutsche Bank Drops On Equity-sale Talk

By Dave Morris

Swedbank CEO fired as scandal over alleged money laundering swirls

A European Central Bank official acknowledged that policy makers were considering tiered rates on deposits, a measure that would bring relief to the banking sector, sending European markets higher on Thursday.

But banks were sitting out the gains, led by Deutsche Bank AG, which slid on reports of a potential equity sale.

How did markets perform?

The Stoxx 600 edged up 0.4% to 378.62, after ending flat on Wednesday.

In the U.K., the FTSE 100 led the major regional indexes, rising 0.9% to 7,257.55, having also ended flat Wednesday. The exporter-heavy exchange may have been assisted by the pound , which fell 0.8% to $1.3086 on Brexit headlines, adding to Wednesday's decline of 0.2%.

The euro was down 0.2% at $1.1202, rebounding after falling 0.3% Wednesday.

Germany's DAX (DAX) increased 0.4% to 11,470, after a flat trading day Wednesday.

France's CAC 40 rose 0.3% to 5,318.29, erasing Wednesday's loss of 0.1%.

In Italy, the FTSE MIB dipped slightly into negative territory, down 0.1% at 21,153.7. It closed Wednesday up 0.3%.

What's moving the markets?

ECB chief economist Peter Praet gave an interview to Bloomberg (https://www.bloomberg.com/news/articles/2019-03-28/ecb-would-need-monetary-policy-case-for-tiering-rate-praet-says) where he admitted that the central bank was examining the prospect of giving banks some form of relief from current negative deposit rates if conditions worsen. ECB deposit rates are currently negative, meaning that in effect, banks have to pay the central bank to hold their cash.

The theory is that if Europe's economy veers further towards recession, the central bank could adopt a tiered system in which certain types of deposits would not be subject to negative rates, giving banks a boost. Praet cautioned that the ECB would "need to be convinced that it would address a monetary-policy question in an efficient way."

Bond markets in Europe and elsewhere rallied Wednesday as global economic growth fears led to a repricing of risk by investors.

Neil Wilson, chief market analyst at Markets.com, noted that "U.S. 10-year yields slipped to 15-month lows, while [German] bunds are heading deeper into negative territory to their lowest since 2016. Equities are facing a tough fight to hold steady in the face of this bond market onslaught." The move impacted Spanish banks Banco de Sabadell SA (SAB.MC), which fell 1.4% and Bankia SA (BKIA.MC) which was down 1%.

Hitting the pound, action on Brexit late Wednesday in the U.K.'s Parliament did little to resolve the stalemate. A series of indicative votes intended to give M.P.'s the opportunity to choose their preferred approaches to Brexit ended in none of the options available commanding a majority.

Prime Minister Theresa May reportedly offered to resign when the U.K. officially left the European Union, but with the speaker of the house reiterating his opposition to putting May's Brexit deal up for a third vote, and Northern Ireland's Democratic Unionist Party reiterating their unwillingness to vote for the deal, the impasse looked likely to remain.

What stocks are active?

Deutsche Bank (DBK.XE) (DBK.XE) slid 3.7% after the Financial Times reported (http://www.marketwatch.com/story/deutsche-bank-weighs-10-billion-equity-sale-ahead-of-possible-commerzbank-merger-ft-2019-03-28) the German lender has been mulling over raising EUR10 billion ($11.2 billion) to help financial a potential tie-up with Commerzbank AG (CBK.XE) which was down 2.6%.

The chief executive of Swedish lender Swedbank AB (SWED-A.SK) was fired Thursday as a scandal over alleged money laundering rattled the bank's largest shareholders and prompted the bank's board to send Brigitte Bonnesen packing. Shares were down 3.7% Thursday, piling misery on Wednesday's decline of 11.9%. Swedbank was raided Wednesday by Swedish police, and the Financial Times reported that U.S. regulators were also probing allegations of money laundering (https://www.ft.com/content/acc757b0-507a-11e9-b401-8d9ef1626294).

German construction company Hochtief AG (HOT.XE) slid 9% on news that Italian highway operator Atlantia SpA (ATL.MI) sold 5.6 million shares, roughly 8% of the German company, in a deal to reduce the Italian firm's debt. A unit of Atlantia operated the bridge in Genoa, Italy, which collapsed in 2018.

German pharmaceutical maker Evotec AG (EVT.XE) climbed 3.8% after reporting 2018 fiscal year results, with revenues up 42% and strong guidance for the coming year. The company expects both group revenues and group adjusted Ebitda to improve by roughly 10%.

(END) Dow Jones Newswires

March 28, 2019 11:00 ET (15:00 GMT)

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