European stocks were higher at the start of the new trading week, with cautious optimism returning after a sharp loss in Friday’s session.
The pan-European Stoxx 600 index was up 1.2.% at 11:05 a.m. in London as nearly all sectors climbed. Construction stocks were up 1.5%, while banks rose 1.3% and financial services climbed 1.4%.
Mining stocks fell 0.4% after China’s industrial profit dropped sharply year-on-year.
In the U.S. early on Monday, First Citizens Bank agreed to buy large parts of Silicon Valley Bank, the U.S. Federal Deposit Insurance Corporation said. However, investors remained on high alert for signs of stresses in the banking system, while fears of contagion remain.
The deal includes the purchase of approximately $72 billion of SVB assets at a discount of $16.5 billion, but around $90 billion in securities and other assets will remain “in receivership for disposition by the FDIC.”
Last Friday, Deutsche Bank shares saw a sell-off after the German lender’s credit default swaps jumped. The stock was up 4.7% in late morning trade on Monday.
“Bargain hunters were out in force for Europe’s banks following the chaos of the past few weeks”, said Russ Mould, investment director at AJ Bell, in a note.
But, he added, “many investors still don’t want to touch the banking sector for fears there is more distress to come,” flagging concerns over a rise in costs for banks due to the potential tightening of regulation, and more cautious bank lending having a negative impact on the economy.
Over the weekend, International Monetary Fund chief Kristalina Georgieva said in a speech that risks to financial stability have increased, though actions by advanced economies have calmed market stress.
Asia-Pacific markets were mixed as investors continue to assess the latest news from the banking sector in the U.S. and Europe.
Meanwhile, U.S. stock futures edged higher following a winning week on Wall Street.