European stock markets rose Monday, after a successful sale of French Treasury bills reassured investors in the wake of the country's credit downgrades late Friday.
The session was investors' first opportunity to react to Standard & Poor's cut to the credit ratings of nine euro-zone nations, including France, Italy and Spain, although speculation of the moves had swirled late Friday.
U.S. markets were closed, subduing trade.
The benchmark Stoxx Europe 600 index rose 0.8% to finish at 251.12, its first gain in four sessions and its highest close since Aug. 3. Among national benchmarks, France's CAC-40 index gained 0.9% to 3225.00 and Germany's DAX index added 1.3% to 6220.01. The U.K.'s FTSE 100 index rose 0.4% at 5657.44.
The S&P action, which affected nine euro-zone nations, including France, Austria, Italy and Spain, had been widely expected since early December.
"It is now being seen as a positive development, as euro-zone governments and the European Central Bank are now likely to put more efforts in resolving the European financial crisis and therefore increasing the likelihood of success [in future measures]," said Markus Huber, head of German sales trading at ETX Capital.
After European markets closed, S&P said it was downgrading the European Financial Stability Facility to double-A-plus, from triple-A, noting that its ong-term debt instruments are no longer fully supported by triple-A-rated guarantees. The EFSF on Tuesday will auction €1.5 billion ($1.90 billion) in six-month debt to help finance its Irish and Portuguese funding programs.
Portuguese borrowing costs rose sharply Monday as some investors were forced to sell their government bond holdings after the S&P downgrade to "junk" status. The yield on the two-year and five-year government bonds rose more than two percentage points to yield 13.49% and 16.80%, respectively, while the 10-year benchmark rose by just over 1.50 percentage points to yield 13.55%, according to Tradeweb.
France, which lost its triple-A status from S&P, raised €8.59 billion from its sale of Treasury bills across three maturities. The average accepted yield was slightly lower than at the last sale.
Among individual stocks, Carnival plunged 16% in London after its Costa Concordia cruise ship ran aground off the coast of Italy on Friday night, claiming at least six lives. The cruise company said the incident could cost between $85 million and $95 million in lost earnings.
Lundin Petroleum skidded 14% in Stockholm after the Swedish oil and gas firm said that oil resources at its Avaldsnes discovery off the coast of Norway may be lower than first estimated.
Richemont rallied 2.8% in Zurich after the luxury-goods group reported a 24% surge in sales for the October-December quarter after seeing solid growth across all regions.
In the currency markets, the euro dropped on the EFSF downgrade but then recovered some of the losses. It traded at $1.2661 in midafternoon North American trade, down from $1.2677 late Friday in New York, and at ¥97.19, from ¥97.56, after falling to a fresh 11-year low of 97.03 yen in Asian trade. The dollar was fetching ¥76.76 yen, up from ¥76.56.
Sterling was unchanged at $1.5317, and the dollar rose to 0.9547 Swiss francs, from 0.9522 francs.
Printed in The Wall Street Journal, page C7
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