European stocks higher on banks insurance scheme

LONDON -- European markets rose Thursday as investors welcomed a British program to allow struggling banks to access government insurance against future losses on toxic assets.

By noon in mainland Europe, Britain's FTSE 100 jumped 1 percent to 3,887.03, Germany's DAX gained 0.7 percent to 3,873.37, and France's CAC 40 grew 0.5 percent to 2,709.68.

Financial stocks led the markets higher, with Royal Bank of Scotland's shares swelling 23 percent.

RBS posted an annual loss of 24.14 billion pounds ($34.4 billion) -- the biggest in British corporate history -- but also unveiled a massive restructuring plan that will offload many of its international businesses.

The already part-nationalized bank also said it will dump 325 billion pounds of toxic assets into the new government insurance program. The British government hopes the Asset Protection Scheme will boost lending by reducing banks' uncertainty about the value of past investments.

Shares in Lloyds Banking Group, which is also negotiating terms of the program with the British government and reports earnings Friday, rose 27 percent. HSBC and Barclays added 6 percent and 10 percent.

"Broadly speaking, we're seeing investors take some comfort from the proposals being made for RBS and the insurance scheme and the restructuring of the company. That's certainly aiding the performance across the banking sector and I think that's rubbing off on the broader market," said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers in London. "There's been a lot of uncertainty and today's proposals are trying to address that uncertainty."

In Asia, markets retreated after an early rally faded amid doubts about a U.S. plan to stabilize banks and worsening prospects for global companies.

Japanese stocks, higher in the morning, closed little changed even as the weakening yen hovered near three-months lows against the dollar, easing pressure on exporters. China's markets took the day's biggest beating as enthusiasm for Beijing's stimulus measures runs low and the economic outlook remains grim.

Across the region, investors appeared unconvinced by U.S. Treasury Department's plan to "stress test" 19 of the largest banks to determine whether they can endure a severe downturn in the economy. Under the plan, any companies that fail under two economic scenarios would be required to raise private funding or accept government stakes.

A lack of specifics about the government's rescue program had weighed on markets in recent weeks. While modestly encouraging, details released overnight weren't enough to persuade investors the plan is a surefire solution to U.S. financial problems at the core of the worst global slump in decades.

"Investors are confused. They want to be positive, but there's increasingly nagging doubt that we're anywhere near a complete solution," said Kirby Daley, senior strategist at Newedge Group in Hong Kong.

Japan's Nikkei 225 index closed largely flat, off just 3.29 points at 7,457.93 after being up more than 1 percent. Hong Kong's Hang Seng lost 0.9 percent to 12,894.94 and South Korea's Kospi fell 1.2 percent to 1054.79.

In mainland China, the Shanghai benchmark plunged 3.9 percent to 2,121.25. The index, while still up over 16 percent for the year and among the world's best performers, is well below its highs in 2009.

Stock measures in India, Thailand and the Philippines also traded lower, while markets in Australia and Taiwan rose. Singapore was flat.

Despite the sinking yen, which boosts repatriated profits from goods sold overseas, Japan's big exporters mostly foundered, with Toyota Motor Corp. and Sony Corp. both shedding nearly 3 percent.

In roughly two weeks, the dollar has advanced about 9 percent against the yen. Analysts say pessimism about the prospects for Japan's economy, the world's second-biggest, is prompting foreign investors to cash out of its currency and stocks.

"It's really severe right now," said Kenichi Hirano, equity general manager at Tachibana Securities in Tokyo. "If you look at the activity, foreigners are in full 'sell Japan' mode."

In New York overnight, the Dow Jones industrial average ended a volatile session down 80.05, or 1.1 percent, at 7,270.89. Broader stock indicators also recovered from earlier lows but finished down. The Standard & Poor's 500 index fell 8.24, or 1.1 percent, to 764.90.

U.S. stock index futures were up, suggesting Wall Street would open higher. Dow futures were up 59 points, or 0.4 percent, at 7,287, while Standard & Poor's futures were up 7 points, or 0.9 percent, to 768.1.

Light, sweet crude oil for April delivery rose 71 cents to $43.21 a barrel in European trade, as a lower-than-expected U.S. crude inventory increase sparked investor optimism that the collapse in demand may be slowing. The contract gained $2.54 overnight to settle at $42.50.