Monday, November 5, 2012

Financials Roar Ahead, Led by European Banks

Financial stocks were leading the market higher early Thursday, with European banks on a tremendous run.

Deutsche Bank (DB) jumped 14% and Barclays (BCS) jumped 12% on the news, as European banks agreed to recapitalize the region’s banks. The Street appears to be pricing in a too-big-to-fail premium for the big European banks, much as U.S. investors did after TARP was announced a few years ago.

The large move comes despite European leaders’ insistence that bondholders take a big haircut on their holdings of Greek debt, a precedent that could presumably cost banks going forward.

U.S. banks were riding the momentum, with Bank of America (BAC) jumping 8.2% before the market opened and Morgan Stanley (MS) –� whose European exposure had caused its credit default swaps spread to soar in recent weeks — rising 7.8%.

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