European stocks lifted by banks; US stocks mixed

 11 Feb 2016 - 7:53

European stocks lifted by banks; US stocks mixed

New York: European stocks ended a three-day losing streak Wednesday as banking shares rallied, while US equities reacted indecisively to statements from Federal Reserve Chair Janet Yellen highlighting elevated economic risks.

European bank stocks, a catalyst for bruising declines in US and European equity markets earlier this week, posted big gains following unconfirmed reports that embattled Deutsche Bank may launch a bond buyback to assuage concerns about its financial strength.

The big German bank -- which had shed about 13 percent Monday and Tuesday -- gained about 10 percent in a rally that helped lift other large banks, such as France's BNP Paribas and Britain's Barclays.

Frankfurt's DAX and the Paris CAC both climbed 1.6 percent, while London's FTSE advanced 0.7 percent.

US stocks initially got a boost as Yellen expressed more pronounced concerns than in her last public comments, in December, about global economic conditions and turmoil in financial markets.

But the gains eroded later in the session as Yellen ruled out any cuts to interest rates and left the door open to further rate hikes this year.

That left a mixed market, with the Dow falling 0.6 percent, the Nasdaq climbing 0.4 percent and the S&P 500 ending essentially flat. 

"A lot of people thought it wasn't dovish," said Kenny Landgraf at Republic Wealth Advisors. "A lot of people were looking for her to back off."

Analysts said sentiment was also weakened by another drop in US oil prices after a US inventory report showed higher petroleum stocks at a key trading hub and lofty US oil production despite lower prices.

Japan's Nikkei index fell 2.3 percent to 15,713.39, dropping to its lowest level since October 2014, as the yen continued to rally in a flight-to-safety trade.

The rout in Japan was especially punishing to financial shares. 

Banking giant Mitsubishi UFJ tumbled 7.1 percent, while Sumitomo Mitsui Financial dived 4.0 percent, Mizuho Financial 5.4 percent and brokerage Nomura 3.5 percent.

The dollar initially rallied on Yellen's testimony, with the euro falling to $1.1233 from $1.1293 Tuesday. But by 2200 GMT, the euro had worked its way back to $1.1286.

"Investors initially bought dollars after Yellen's testimony," said BK Asset Management analyst Kathy Lien."But by the end of the New York session they realized that chances are the Fed won't be pulling the trigger next month."