2010-07-23 11:48

XTB market snapshot

The release of the stress test results, covering 65% of the European Union banking sector, will be the event of Friday. Although the official release is scheduled at 6 pm CET (the CEBS press conference will take place 2 hours later), the unofficial results should arrive earlier today. El Pais has already informed that a few out of 18 Spanish banks covered in the stress test did not pass it.

Stress test in the spotlight

The stress tests of the European banking sector are quite controversial. First of all, the criteria taken into consideration are not clear. Therefore there is no consensus, regarding the threshold, at which the results would support the sentiment. Goldman Sachs, on the basis of its own survey, expects that 10 out of 91 financial institutions covered by the test will not pass it and the required capital injection would reach 37 bln euro. The Nomura analysts estimate that 10 banks failed the stress test but in their opinion the required injection could reach even 75 bln euro. They also indicate that problems of 30-40 banks combined with 100 bln euro capital required would be a sign for a critical situation. UBS expects 10-20 banks failing the test. On a basis of all estimates, a consensus would be 10-15 banks in trouble and in need of around 30 bln euro capital injection. It is much less than 74 bln dollar injected into the American banking sector.

Wall Street gaining

After the Wednesday sell-off on Wall Street caused by Ben Bernake, who described the US economic outlook as unusually uncertain, yesterday’s session ended with strong gains. S&P 500 rose 2,25% to 1093,67 pt., Nasdaq Composite 2,68% to 2245,89 pt. Good sentiment on European markets, quarterly results and figures from US and Europe beating the expectations were an impulse for bulls.

Friday schedule

Besides the stress test results, the Ifo index, second-quarter British GDP growth estimates and Canadian CPI releases are also scheduled on Friday.

Jacek Mielcarek
jacek.mielcarek@xtb.pl
XTB Poland

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