Euro stocks turn higher as banks trim losses; DAX up 0.25%

Investing.com – European stock markets erased early losses to trade modestly higher on Wednesday, as shares in French lenders pared sharp losses suffered in the wake of a credit downgrade by ratings agency Moody’s earlier in the day.

During European morning trade, the EURO STOXX 50 rose 0.35%, France’s CAC 40 climbed 0.4%, while Germany’s DAX 30 edged 0.25% higher.

European equities opened lower as risk sentiment was hit after Moody’s downgraded the credit ratings of Societe Generale and Credit Agricole, while extending its review of BNP Paribas, citing their exposure to Greek debt.

However, the move by Moody’s had been widely expected and priced in to markets, following weekend reports that a downgrade of French lenders was imminent.

BNP Paribas dropped 2.95%, after being down as much as 7% after the open, Societe Generale slumped 3.1%, while Credit Agricole shares reversed a 4% decline to trade 0.8% higher.

Comments from European Commission President Jose Manuel Barroso saying that the region will soon present options for the introduction of euro bonds also provided support.

Markets were also awaiting a conference call planned between German Chancellor Angela Merkel, French President Nicolas Sarkozy and Greek Prime Minister George Papandreou later in the day.

Elsewhere, in London, the FTSE 100 rose 0.4% as shares in clothing retailer NEXT rallied 5.7% after reporting a 35% increase in first-half net profit. Revenue in the period rose 3.6% to GBP1.57 billion, helped by strong brand sales. 

The upbeat earnings results boosted other retailers, with Marks and Spencer gaining 2.75% and home-improvement retailer Kingfisher climbing 2.5%.

Meanwhile, shares in oil major British Petroleum jumped 3.1% after the Wall Street Journal reported that a U.S. federal investigation into last year’s Deepwater Horizon oil spill could be released as soon as Wednesday. 

Financial sector stocks also contributed to gains, with Royal Bank of Scotland shares climbing 1.75%, while Lloyds Banking Group gained 1.4%.

Elsewhere, the outlook for U.S. equity markets was downbeat. The Dow Jones Industrial Average futures pointed to a loss of 0.55%, S&P 500 futures signaled a decline of 0.5%, while the Nasdaq 100 futures indicated a 0.3% drop.      

Later in the day, the U.S. was to release government data on producer price inflation and retail sales, while U.S. Treasury Secretary Timothy Geithner was to speak.