(Updates to close)
By Natsuko Waki
LONDON, Feb 18 (Reuters) - Banks drove European shares
sharply higher on Monday ahead of key earnings data later this
week which will show their progress in writing down losses
related to U.S. subprime mortgages.
Platinum, meanwhile, raced to new historic highs while the
the dollar rose against a basket of major currencies after
hitting a 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, also
helped sentiment among British banks.
The FTSEurofirst 300 index <> closed up 2 percent
while the DJ STOXX bank sector index <.SX7P> was up 2.5 percent.
MSCI's main world equity index <.MIWD00000PUS> gained 0.5
percent. U.S. financial markets were closed for Presidents Day
holiday.
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 damage to the sector from the credit crisis
holds the key to investor sentiment and the performance of risky
assets including stocks after some share indexes dipped into a
bear market cycle -- a period of prolonged losses.
"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," said Justin
Urquhart Stewart of 7 Investment Management.
The iTraxx Crossover index <ITCRS5EA=GFI>, the most-widely
watched indicator of European credit market sentiment, tightened
to 560 basis points, after hitting record wide levels last week
due to concerns about forced selling on credit products.
Emerging sovereign spreads <11EMJ> widened 3 basis points
while emerging stocks <.MSCIEF> was up 0.6 percent on the day.
The March Bund future <FGBLH8> was down 0.5 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.
It was quoted at $2,105 an ounce late in London. Gold <XAU=>
was steady at $903 an ounce.
U.S. light crude oil <CLc1> rose 50 cents to $96.01 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 0.2 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.
It was at $1.4649 to the euro <EUR=> and at 108.10 Japanese
yen <JPY=>.
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.
( Editing by Ron Askew)
