Europe stocks rise on China, U.S.; Spain sinks
LONDON (MarketWatch) -- Most European stock markets ended a choppy trading with solid gains on Tuesday, as encouraging news from China and the U.S. spurred risk-on investments, while Spanish stocks tanked on concerns about the country's banking sector.
The Stoxx Europe 600 index (SXXP) closed 0.8% higher at 244.30, the highest closing level in a week.
Posting one of the biggest gains in the index, oilfield-services firm CGG Veritas (GA) jumped 5.7% after UBS lifted the stock to buy from neutral.
The gain helped push the French CAC 40 index (PX1) 1.4% higher to 3,084.70.
Gains in Europe were inspired by a positive mood in the U.S., where home prices broke a five-month streak of declines. Read full story about home prices
Meanwhile, a gauge of consumer confidence in the U.S. for May slipped below analysts' expectations. Read more about consumer-confidence.
Upbeat trends in Asia, where the prospect for more stimulus measures to fuel growth in China cheered investors, also spilled over into the European markets. Read more about China seen bringing forward stimulus plan
But casting a pall, Spanish stocks fell sharply amid concerns about the country's banks and as fresh data showed the extent of the nation's economic problems. Retail sales for April dropped for a 22nd consecutive month, tumbling 9.8% on an annual calendar-adjusted basis, as consumers reined in spending on such things as clothing and footwear. Read more about Spanish retail sales seeing steep decline
The IBEX 35 index (IBEX) plunged 2.3% to 6,251.70. Troubled lender
"The real worry in the equity space now is the actual need for capital in Spanish banks. Bankia needs €19 billion, but there are a lot of banks in Spain and the clarity as to what they need in terms of capital in order to stay solvent is currently not present," said Christian Tegllund Blaabjerg, chief economist at FIH Erhvervsbank.
"The problem in Spain is simply that the Spanish government cannot afford to recapitalize the Spanish banks and so far the ECB has not stepped in with a solution," he added. "I am pretty sure that ECB would love to do this - find a cross-European solution for recapitalization of the banking system, but needs a altered political mandate."
Such a mandate will happen at the earliest at the European Union summit in the end of June, he said.
The yield on 10-year Spanish government bonds (10YR_ESP) fell 4 basis points to 6.41%, according to FactSet. A level of 7% for Ireland and Greece triggered bailouts in those countries as borrowing because increasingly difficult for governments, something markets are equally worried about for Spain.
Adding weight, governing council member of the European Central Bank Ewald Nowotny said there are no talks of reinstating government bond purchases or providing more long-term loans to banks, according to Reuters. When asked about Spain's banking problems, he said rescuing those institutions is the responsibility of national governments.
Stocks in neighboring Portugal were also lower, with the PSI 20 (PSI20) down 1.1% at 4,567.18.
Nowotny also said the aim is to keep Greece in the euro zone, but that the decision is up to the country and its government.
In Italy, the government sold €8.5 billion of six-month T-bills at the top end of its target range, although borrowing costs rose. The yield on 10-year Italian government bonds (10YR_ITA) were 11 basis points higher at 5.76% in the secondary market, according to FactSet.
The FTSEMIB index (FTSEMIB) ticked 0.4% higher to 13.107.13.
Miners support London stocks
In London, growth stimulus indications from China supported miners, helping to lift the FTSE 100 index (UKX) 0.7% to 5,391.14.
Oil firms followed oil prices higher.
In Germany, car makers showed positive moves, helping push the DAX 30 index (DAX) 1.2% higher to 6,396.84.