Wall Street Journal
June 28, 2016
June 28, 2016
U. K. and European bank shares rebounded Tuesday as the pound gained ground and markets took a pause after two days of heavy selling.
Barclays PLC and Lloyds Banking Group PLC were both up around 6% despite two credit-rating downgrades Monday night for the United Kingdom. The two banks’s fortunes are closely tethered to the U.K. economy and spending and investment. Italian banks also gained after reports Monday the Italian government might inject €40 billion ($44.11 billion) into its banks.
Analysts at investment banks and brokers made dire warnings Monday that Britain leaving the U.K. would disrupt operations at many U.K. and European banks and that political, regulatory and business uncertainty will persist for months. The sector has seen many downgrades, and some banks’ shares hit all-time lows Monday.
At the lower prices, Credit Suisse analysts on Tuesday said the market “could already be close to pricing contagion of a full Brexit.” They said policy makers also will be more likely to act because of the selloff. But the Credit Suisse analysts said banks weren’t positioned for the market turmoil and what it means for revenue, and earnings could fall.
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