By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stocks staged a relief rally
Monday, with banks in the driver's seat, after Cyprus and its
international lenders early in the morning struck a deal to save
the country from bankruptcy.
The Stoxx Europe 600 index rose 1% to 296.82, climbing back
after a 1.1% loss from last week.
All eyes remained on Cyprus, where the cash-strapped nation
reached a deal on bailout terms with the European Central Bank, the
European Commission and the International Monetary Fund, also
referred to as the troika, clearing the main hurdle to secure 10
billion euros ($13 billion) in financing.
As part of the agreement, there will be a deep restructuring of
two of the largest Cypriot banks, as well as a downsizing of the
country's overall banking sector. Additionally, a substantial levy
on bank deposits above EUR100,000 was kept in place, scrapping a
controversial tax on deposits below that level, which was heavily
debated last week.
The Cyprus Stock Exchange was closed for trading all of last
week, but said it would recommence as normal on Tuesday. Monday is
a public holiday in Cyprus.
"The deal may give short-term calm, but it raises new potential
problems for the future as capital controls and losses on deposits
set a dangerous precedent," analysts at Danske Bank wrote in a
note. Read: Cyprus still at euro-zone exit risk -- Moody's
"Future problems in Greece or Spain could escalate faster as
capital controls and losses for deposits above EUR100,000 will now
be seen as a real possibility," they added.
Banking shares, which were among the hardest hit sectors last
week, recouped on Monday.
Shares of Banca Popolare dell'Emilia Romagna Scarl rose 1.8% in
Milan, Credit Agricole SA added 2.1% in Paris and Barclays PLC
(BCS) gained 2.7% in London.
Among country-specific indexes, France's CAC 40 index traded
1.2% higher at 3,821.89 and Germany's DAX 30 index rose 1.2% to
8,007.80.
Shares of Bayer AG rose 2.1% in Germany, as Japan's Ministry of
Health, Labor and Welfare approved the drug maker's Stivarga
tablets for treatment of advanced colorectal cancer.
In France, drug maker Sanofi SA (SNY) added 1%. The company said
it has signed a joint venture agreement with Transgene SA , up
4.2%, for production of immunotherapy products.
The U.K.'s FTSE 100 index added 0.9% to 6,451.94, further lifted
by Vodafone Group PLC (VOD) which rose 3.4%.
The Sunday Times reported that the U.K. mobile operator eyes
selling its shares in a venture with Verizon Communications Inc.
(VZ), potentially leading to a $135 billion windfall for Vodafone
and an exit from the U.S. market.
U.S. stock futures pointed to a higher open on Wall Street,
ahead of a panel discussion featuring Federal Reserve Chairman Ben
Bernanke. See: 6 gut checks before the stock market's opening
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