Europe open: Shares up sharply as SVB deal boosts banking sector

European stocks were sharply higher at the open on Monday as investors bet on the recent crisis in the global banking system had abated after First Citizens Bank said was in advanced talks to acquire Silicon Valley Bank in the US.

The pan-European Stoxx 600 index was up more than 1% in early trade, with all major bourses higher. European Union leaders and the European Central Bank last Friday moved to reassure markets, saying Continental banks were well capitalised. US officials and the Financial Stability Oversight Council insisted their system was “sound and resilient”.

First Citizens bought all the loans and deposits of SVB and gave the Federal Deposit Insurance Corp equity appreciation rights in its stock worth as much as $500m, the FDIC said.

The news boosted the banking sector, with Deutsche Bank, Credit Suisse, Commerzbank, Société General and BNP Paribas all higher.

“A key underlying driver of the recent market maelstrom has been the sea change in monetary policy after the punchbowl of cheap money was removed. Central banks have been desperately scrambling to keep a lid on spiralling inflation rates with an abrupt ending to the era of rock bottom interest rates which had underpinned asset price growth and long helped businesses to thrive,” said Interactive Investor analyst Victoria Scholar.

Reporting by Frank Prenesti for Sharecast.com