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Monday, September 13, 2010

Banks move stock higher today ............................

 new global banking rules and robust Chinese economic data helped shore up sentiment in the markets Monday, with stocks up strongly and the euro climbing a cent against the dollar.

The FTSE 100 in London was up 59 points, or 1.1 percent, while the DAX in Frankfurt rose 56.31 points, or 0.9 percent. The CAC 40 in Paris was 40.86 points, or 1.1 percent, higher.

Futures indexes indicated a higher opening on Wall Street. American stocks have rallied since the first of the month, pausing only once because of worries about European banks. Otherwise, traders have been encouraged by economic reports that have topped modest expectations. Recent data has relieved worries that the economy might slip back into recession, though it still indicates growth will be slow.

The Dow is up 4.5 percent in September, typically one of the weakest months.

Treasury prices fell as investors moved back into stocks. The yield on the 10-year Treasury note rose to 2.83 percent from 2.79 percent late Friday.

Europe’s positive start to the week has come after central bankers agreed on rules to require banks to hold more capital as a buffer against future difficulties and Chinese figures showing that growth in industrial production accelerated to 13.9 percent year-on-year in August from July’s 13.4 percent increase.

The main relief in the markets over the conclusion of the so-called Basel III negotiations Sunday is that the proposals for new bank rules appear to be less onerous than many in the markets had been predicting.

“There was some slight trepidation on Friday ahead of the weekend’s meeting regarding capital requirements for banks, but while new levels are more than double, the timetable for putting them in seems fairly relaxed,” said Ben Critchley, a sales trader at IG Index.

The recommendations, which must be ratified by the Group of 20 leading industrial and developing nations in November, will require banks to hold as much as 7 percent of their capital in reserve. One reason the world suffered its deepest recession since World War II was that the banks were badly undercapitalized when the financial crisis broke around three years ago.

Though the new ratio is higher than the 2 percent banks held in the run-up to the financial crisis, they will have up until 2018 to put the rules fully in place.

The president of the European Central Bank, Jean-Claude Trichet, said the deal was ”a fundamental strengthening of global capital standards,” while American regulators described it as a ”significant step forward” in preventing a repeat of the banking crisis that led to many banks collapsing or needing emergency funds from governments to shore up their capital position.

Analysts said the agreement had helped underpin investor confidence at the start of a busy economic news week, particularly in the United States.

There will be some interest in Tuesday’s release of retail sales in the United States for August as investors get a chance to see if the growing talk of a double-dip recession during the month reined in consumption.

Retail sales are particularly important because consumer spending accounts for around 70 percent of the American economy.

The improvement in sentiment was visible in the currency markets, where the euro was 0.8 percent higher on the day, at $1.2810 .

Earlier in Asia, Japan’s Nikkei 225 stock average rose 82.65 points, or 0.9 percent, to 9,321.82 as the dollar remained above 84 yen. Last week, the dollar fell to a fresh 15-year low of 83.35 yen, which further fueled concerns among Japan’s high-value exporters that they would be priced out of the international marketplace.

Hong Kong’s Hang Seng index added 2 percent and China’s Shanghai Composite Index gained 0.9 percent.
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