May 26, 2016 / 12:12 PM / 2 years ago

European shares steady as Banco Popular cash call hits banks

(ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details) Adds details, updates prices)

* STOXX 600 up 0.1 pct, FTSEurofirst 300 up 0.2 percent

* Bank sector weighed down by Banco Popular rights issue

* But commodity stocks rally as Brent hits $50, copper rises

* ArcelorMittal rallies after upbeat note from Goldman

By Danilo Masoni and Alistair Smout

MILAN/LONDON, May 26 (Reuters) - European shares steadied on Thursday, with banks coming under pressure after a surprise rights issue by Spain’s Banco Popular fuelled fears others in the region may follow to strengthen their balance sheets.

But commodity stocks were boosted by Brent crude oil prices hitting $50 a barrel for the first time since November and copper prices reaching a two-week high.

The pan-European STOXX Europe 600 was up 0.1 percent by 1152 GMT, while the FTSEurofirst 300 added 0.2 percent. Both hit a 4 week high in the previous session, helped by a two-day rally in banking stocks.

Europe’s banking sector index gave up part of those gains, falling 0.4 percent after Banco Popular announced a 2.5 billion euros cash call, which caught some investors by surprise.

“This is creating downward pressure across the rest of the sector for the main banks,” Citi said in a note for clients.

Speculation of potential capital hikes weighed particularly on Spanish and Italian banks with Caixabank, Sabadell , UBI and UniCredit all down by between 3.5 and 6.4 percent. Banco Popular fell 22.4 percent.

Guardian Stockbrokers director of trading Atif Latif said that the rights issue suggested euro zone banks were “still a major concern.”

“Credit risk concerns, lack of credible asset quality, balance sheet issues and a lack of reserves... all this makes for gloomy reading for those with EU bank exposure,” he said.

The STOXX 600 Basic Resources index was the top sectoral riser, up 2.5 percent as miners benefited from a rise in the price of copper.

ArcelorMittal, the world’s largest producer of steel, was the biggest gainer in the sector and the broader STOXX Europe 600 index with a rise of more than 9 percent.

Goldman Sachs raised its target price on the stock, and maintained its “conviction list buy” recommendation.

Oil companies rose 0.6 percent after Brent crude hit $50 a barrel, boosted by a drawdown in crude stocks in the United States last week.

The move in the sector was muted, and it remained below highs for the year hit in April.

“When we broke through $30 and when we broke through $40, we were seeing real excitement in the market, but we’ve got a situation where Brent is above $50 but investors don’t believe it is sustainable,” said Tony Cross, market analyst at Trustnet Direct, who pointed to an OPEC meeting next week and Canadian supply starting to come back as uncertainties for oil.

Newspaper group Daily Mail and General Trust fell 10 percent after it said a print advertising downturn was squeezing margins in its media business, resulting in an 11 percent drop in first-half profit and a lower outlook.

Today’s European research round-up

ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). In a real-time, multimedia format from 0600 London time through the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will continue to be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.

If you have any thoughts, suggestions or feedback on this, please email

Mike Dolan, Markets Editor EMEA. (Reporting by Danilo Masoni; Editing by Alexander Smith)

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