European banking stocks rise as debt concerns decrease

Financial and utility stocks have been the largest gainers in the Stoxx Europe 600 Index this morning following a series of upgrades by Goldman Sachs GS and liquidity increases in the European market, decreasing credit crunch worries. Most indexes show that stock prices have been hovering around the same level, as investors wait for more information from the summit of European Union leaders in Brussels. Leaders are discussing European growth policies and a euro-zone firewall. Goldman Sachs upgraded banks as performance has improved and leadership decisions have increased liquidity, it said in a March 1 note. The bank rose expectations for utilities as those stocks offer the highest dividend. The Stoxx Europe 600 index rose less than 1% for banking and utilities following the upgrade. The index rose 3.9% in February, the largest January to February increase since 1998 as better-than-expected economic reports continued out of the U.S. and European leaders took steps to contain the regions debt crisis. Goldman Sachs also increased the three and six month price targets for the Stoxx Europe 600 index to 270 and 275 respectively. “This linear return profile reflects our view that while uncertainty remains high, our central case is no longer for any near-term weakness to be sustained on even a 3 month horizon,” analysts said in the note. Finance ministers in Europe delayed approval on about half of Greece's second bailout. The full bailout of Greece may be approved by the end of next week, when investors will learn how many private-sector holders of Greek government bonds will voluntarily accept a 50% cut in the face value and a 75% cut in their present value of their bonds. News from other European countries may also have decreased the enthusiasm from the Goldman Sachs upgrade as German retail sales were down 1.6% on a monthly basis in January, less than analysts' expectations of a 0.3% increase, and Spain reported an increased rate of job loss in February, strengthening investor concerns that the economy there may be contracting. Goldman Sachs downgraded telecoms, healthcare and personal and household goods. The bank also ended its recommendation to short building materials.