(Updates with latest prices)
By Natsuko Waki
LONDON, Feb 18 (Reuters) - Banks drove European shares
higher on Monday ahead of this week's key earnings data which
will show their progress in writing down losses related to U.S.
subprime mortgages, while platinum raced to new historic highs.
The dollar rose against a basket of major currencies after
hitting 1-1/2 week low last week following disappointing U.S.
data. Oil climbed above $96 a barrel, helping to erase earlier
losses in emerging market assets.
Weekend news that the British government is to nationalise
Northern Rock <NRK.L>, which fell victim last year to a jump in
interbank lending rates as a result of the credit crisis, has
also helped sentiment among British banks.
This week's earnings results from scandal-hit French bank
Societe Generale <SOGN.PA>, peer BNP Paribas <BNPP.PA> and
Britain's Barclays <BARC.L> will show the global banking sector's
progress in writing down an estimated $300-400 billion of
subprime losses.
The extent of the sector's damage from the credit crisis
holds the key to investor risk sentiment and the performance of
risky assets including stocks after some share indexes dipped
into a bear market cycle -- a period of prolonged losses.
"This is a bear market, and there will be some rallies in
it," said Justin Urquhart Steward of 7 Investment Management.
"The focus this week is going to be on the banks, as
investors scrutinise their results to see if they've put off
balance sheet things that should actually be on balance sheet,
and whether we've actually been led a merry dance."
The FTSEurofirst 300 index <> was up 1.4 percent while
MSCI main world equity index <.MIWD00000PUS> was up 0.2 percent.
U.S. financial markets are closed for Presidents Day
holiday.
The iTraxx Crossover index <ITCRS5EA=GFI>, the mostly-widely
watched indicator of European credit market sentiment, tightened
to 565 basis points, after hitting record wides last week due to
concerns about forced selling on credit products.
Emerging sovereign spreads <11EMJ> widened 3 basis points
while emerging stocks <.MSCIEF> was steady on the day.
The March Bund future <FGBLH8> was down 0.3 percent.
SHINING PLATINUM
Platinum <XPT=> surged to $2,107 an ounce, gaining more than
20 percent since late January after South Africa, which accounts
for 80 percent of global supply, was hit by power cuts that
forced mines to shut for five days last month.
Gold <XAU=> was steady at $903.40 an ounce.
U.S. light crude <CLc1> rose 0.8 percent to $96.25 a barrel
as an escalating row between OPEC member Venezuela and oil major
Exxon Mobil <XOM.N> outweighed concerns about the effect of a
slowing U.S. economy.
The dollar rose 0.3 percent against a basket of major
currencies <.DXY>, gaining some support from firmer stocks and
recouping some of the losses made on Friday after data showed
U.S. consumer sentiment fell to a 16-year low.
Investors expect the Federal Reserve to cut interest rates
by 50 basis points in March, on top of its rate reduction of 225
bps since September -- moves which have depressed the dollar.
"The lethal combination of weakening house prices, high
energy prices, tighter lending and volatile asset markets will
be difficult to overcome and even the prospect of further rate
cuts could do little in this environment," Calyon said in a note
to clients.
(Additional reporting by Sitaraman Shankar; editing by Tony
Austin)
