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Anxious Markets Soothed By European Bank Bailout

Anxious Markets Soothed By European Bank Bailout
Within financial markets that are dominated by caution ahead of a trio of major events on Thursday, the smoothly executed rescue of Spain's struggling Banco Popular prodded European banking stocks higher on Wednesday.
Made barely a ripple in Europe's stock and debt markets, and the first use of a regime to deal with failing banks adopted after the 2008 financial crisis was the absorption of Popular by Spain's biggest bank Santander for a nominal one euro.
A recovery for Madrid's stock market was supported and this week's broadly weaker mood was fended off by the success of the process pushed shares in many major banks higher, as the morning wore and news of the events percolated into the market.
But a major switch in language and policy direction by the European Central Bank at its meeting on Thursday are likely to be delayed by the rescue as it also underlines the risks to growth, banking and government debt burdens.
The euro was down 0.15 percent against the dollar in morning trade in Europe and has been kept in check by that incident in turn.
"Maybe tomorrow's ECB meeting sees nothing but platitudes and disappoints a market that is getting ahead of itself," said Societe Generale analyst Kit Juckes.
"But (for us) that would be a huge euro buying opportunity, because ECB normalization IS coming. And when it does, the euro simply won't be able to sustain undervalued levels for long."
Madrid's IBEX recovered from early losses to trade flat on the day and European blue chip shares had risen by 0.1-0.2 percent on Wednesday morning. European banking shares rose 1.2 percent.
While the flood of money into the perceived security of Japan's yen this week continued, oil prices, however, were again almost 1 percent lower.
Noting a 7-week high and placed at 109.17 yen per dollar, the yen was up another 0.2 percent. Pressured by a sharp drop in U.S. Treasury yields to seven-month lows, the greenback has lost more than 1 percent so far this week.
along with Senate testimony from James Comey, the former FBI chief fired by President Donald Trump, a surprisingly closely-fought British election set for Thursday is weighing on investors' minds.
The wind out of his plans to roll back regulations and overhaul the tax system - an agenda that had sent the dollar to 14-year highs earlier this year, could be taken out and Trump is more ikely to be further hurt by any damaging revelations in Comey's testimony.
"Tomorrow’s what is being dubbed as 'Triple Threat Thursday', ... an event-filled day that could send global markets on a bumpy ride," said ING currency strategist Viraj Patel.

Christopher J. Mitchell

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