Investors find some reassurance in Europe’s bank tests

Investors took some reassurance that European banks had passed “stress tests” on their ability to deal with a debt crisis, prompting European stock futures prices to rise on Monday. Shares rose in Asia as the worst fears about the tests were assuaged and European markets were set to follow suit with spread betters calling for British, German and French stock markets to open as much as 0.8% to 1% higher. The euro held on to its gains from Friday. But scepticism remained about the credibility of the tests because they showed a combined capital shortfall of the 91 banks put under the microscope that was much smaller than expected. On the surface, if anything, you have to take these tests with a pinch of salt, said Jonathan Cavenagh, currency strategist at Westpac, Sydney. Sovereign debt problems remain, funding constraints for their banks are still there and these have the potential to weigh on the euro. The MSCI Asia Pacific Index was up 0.5% at 11:20am. It was still down around 7% from its year-to-date high in mid-April, in part over concerns that debt defaults in the euro zone could derail the global recovery.

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