The Committee of European Banking Supervisors (CEBS) reported on Friday that seven of the ninety one banks tested in the European Union stress tests failed to pass.
Spain produced five of the failed institutions with the majority being savings banks. Greece’s ATEBank and Germany’s state owned Hypo Real Estate made up the other two names with the total shortfall in capital required amongst the group totalling 3.5 billion Euros. The Euro was the biggest loser after the results were announced, selling back off towards the 1.28 level against the Dollar.
European Indices traded largely between small losses and gains throughout the day with particularly tight trading ranges as most investors had a firm eye towards the results of the bank stress tests, due out after European stock markets closed.
The results of the stress tests has been a headline that most in the market has been waiting for and so naturally with the results due out after the market closes, and it being a Friday too, today’s session has been fairly quiet.
Gains in the miners were weighed down by some profit taking in the banks, mostly as investors reduced their banking risk ahead of the stress test results, and this left European Indices slightly higher on the day, to close the week around 1% higher.
UK GDP surges
One of the main headlines on the day was the fact that UK GDP for the second quarter smashed past market expectations to post a growth of 1.1%, almost double what had been expected. Many investors will now question the validity of double dip recession fears and when you ally today’s UK GDP data with yesterdays better than expected retail sales figures and terrific euro zone industrial orders data, it has certainly helped to reassure the near to medium term market fears.
That said, preliminary GDP figures are liable to change and so whilst today’s data is extremely positive, many traders are unlikely to plough full steam ahead just yet and are likely to wait for more readings to confirm how quickly the UK is growing.
Whilst stronger growth is likely to help calm fears of a double dip, much stronger growth could also raise the likelihood of interest rate hikes sooner as opposed to later.
Please remember that Spread Betting and CFD Trading are leveraged products that carry a high level of risk to your capital and can result in losses that could quickly exceed your initial outlay. These products may not be suitable for everyone, so please make sure you fully understand the risks involved.
Spread Betting and CFD comments by Nick Serff, Market Analyst, City Index.
The above should not be construed in any circumstances as a recommendation or offer to sell or recommendation or solicitation of any offer to buy any security or other financial instrument.
Neither City Index not Spread-Betting.org warrant or represent that the material is accurate, complete, not misleading, or fit for the purpose which it is intended and it should not be relied upon as such.