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London powers up 2.3%
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August 23, 1999: 1:07 p.m. ET
U.K. index surges to month high as banks shine; other bourses also gain
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CITY (CNNfn) - Shining bank stocks seized the limelight in London Monday, driving a 2.3 percent rally that swept the blue chip index to its highest close in a month. The surge got some extra juice from an early bull run on the Dow Jones industrial average, which had posted a triple-digit gain by the time London closed.
Other European bourses also finished on higher ground as talk of a retail alliance between two big German banks overshadowed a decision on an expected credit tightening by the U.S. Federal Reserve due Tuesday.
London's benchmark FTSE 100 raced up 141.3 points, or 2.29 percent, to close at 6,322.1. It was driven by sharp gains in pharmaceutical and bank issues. The bank sector, seen as especially sensitive to changes in interest rates, accounts for 18.2 percent of the FTSE's total valuation. On Monday, four banks were among the leading six gainers on the blue-chip index.
In Frankfurt, the electronic Xetra Dax sprinted 0.91 percent higher to finish at 5,301.98 amid speculation that two of the country's leading financial institutions -- Deutsche Bank (FDBK) and Dresdner Bank (FDRB) -- are in talks aimed at merging their retail operations. Any deal would fall short of a full-scale merger, however.
The two banks spearheaded the Dax gainers, with Deutsche Bank rising 5.35 percent and Dresdner advancing 4.18 percent.
In Paris, the CAC 40 hoisted itself to a 0.34 percent higher close, at 4,487.35, helped by the early sprint on Wall Street and a general easing of interest rate fears a day before the Fed meeting.
Zurich's SMI advanced 1.36 percent to 7,147.5. Markets in Europe are expecting the Fed to hike short-term rates modestly while taking a neutral stance with regard to future rate increases.
The Eurotop 300, a broader gauge of pan-European issues, closed up 1.54 percent at 1,310.45, reflecting the buoyant mood across the region.
In London, subsiding concerns over interest rates created a fertile environment for bank-stock buying. Investors gambled that the Fed will take a neutral monetary stance after its expected quarter-point hike in interest rates Tuesday.
Standard Chartered (STAN) led the banks higher, vaulting 8.85 percent, while the second-place gainer, Bank of Scotland (BSCT) leapt 6.9 percent. Lloyds (LLOY) added 5.39 percent and Barclays (BARC) gained 5.17 percent.
Drug groups continued to curry favor with investors. Glaxo Wellcome (GLXO) added 3.06 percent amid reports that it will receive fast-track U.S. regulatory approval for its bowel treatment Lotronex. Rival SmithKline Beecham (SB) jumped 3.78 percent as sector sentiment improved.
Beverage maker Allied Domecq (ALLD) rose 2.10 percent despite issuing a profit warning as shareholders approved the $2.7 billion sale of its pub unit to Punch Taverns.
In Frankfurt, the only major news of the day outside the banking sector came in telecoms. Deutsche Telekom (FDTE) ended down 1.2 percent at 38.00 euros after a report that it may cut long-distance tariffs again.
In Paris, Sanofi-Synthelabo, Europe's number-six drug maker, topped the advancers list, rising 3.84 percent to 41.90 euros. Banking giant BNP (PBNP) gave up 1 percent to 74.10 euros as investors awaited a decision by French regulators on whether BNP can form a three-way merger with only a minority stake in target Société Générale. BNP already has secured a majority stake in its other target, Paribas.
Suez Lyonnais des Eaux (PLY) closed down 1.78 percent following its $1.8 billion purchase of the shares in U.S.-based United Water Services (UWS) that it doesn't already own.
In Zurich, banking shares performed well, with UBS adding 13.50 Swiss francs to 445.50 ahead of first-half results Tuesday and Credit Suisse Group climbing 6 to 289 francs.
Pharmaceutical firm Novartis gained 45 to 2,290 francs amid talk that the heavyweight drug company may be mulling a tie-up with New Jersey drug firm American Home Products. 
-- from staff and wire reports
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