EUROPEAN REPORT

EUROPEAN equities closed higher yesterday as financial stocks climbed on hopes a recession in top global economies was abating, while energy shares tracked higher crude oil prices.

The FTSEurofirst 300 index of top European shares closed 2.4 per cent higher at 859.88 points after falling as low as 827.32. The index, which slumped 45 per cent in 2008, is up 3 per cent this year.

Financials were the top gainers, with Standard Chartered rising 8.5 per cent, HSBC up 4.4 per cent, Barclays gaining 5 per cent, Commerzbank up 9 per cent, KBC up 13 per cent, Aegon rising 11 per cent and UniCredit jumping 13.5 per cent.

“The market is bouncing back after last week’s weakness and is showing that investors are prepared to increase their risk appetite,” said Henk Potts, equity strategist at Barclays Stockbrokers.

Energy stocks powered higher, tracking a 3 per cent jump in crude prices BP, Royal Dutch Shell, Repsol, Total, BG Group and StatoilHydro added 1.4 to 4.5 per cent.

Carmakers also accelerated. BMW, Daimler, Peugeot and Renault were up 0.2 to 2.8 per cent. Volkswagen froze talks over a merger that could bail out its majority owner Porsche leaving the luxury carmaker scrambling to reassure investors a deal to unite the two was still alive. Volkswagen rose 2.2 per cent, while Porsche was down 0.1 per cent.

CREDIT REPORT
INVESTORS offered the Bank of England a record amount of long-dated gilts at its weekly reverse auction yesterday, trying to lock in profits after UK government debt prices rose off last week’s three-month lows.

Investors offered £10.9bn of gilts after the BoE said it would buy up to £3.43bn of the sovereign bonds maturing between 2020 and 2032, as part of its £125bn quantitative easing programme.

This was the highest absolute sum of gilts offered at any of the reverse auctions for long-dated gilts, which started on 16 March, though buybacks of shorter-dated debt have seen bigger sums offered.

The BoE is buying gilts as part of its quantitative easing programme to boost the flow of credit in the recession-hit economy and expanded the scheme this month by £50bn to £125bn.

“There’s a lot of interest in offering bonds back to the BoE at these levels,” said RBS Gilt expert Jason Simpson.

Yesterday’s offer-to-cover ratio of 3.17 was most recently beaten on 6 April, when the BoE received offers totalling £9.1bn but only wanted to buy £2.5bn of gilts.

The Bank of England still ended up paying slightly above the market price before the auction, showing that investors were not offering gilts cheaply in a rush to offload them.