European stocks rise after Portugal bank rescue

European stocks rose on Monday, recouping some of last week’s heavy losses after news of a Portuguese state rescue for Banco Espirito Santo. Banking shares got a particular boost from news of the nearly 5.0 billion euro ($6.7 billion) bailout, announced late on Sunday, ending a crisis that had rattled European markets for weeks. Frankfurt's main DAX index rose 0.61 per cent over Friday's close to end the day at 9,154.14 points. London's benchmark FTSE 100 index closed largely flat at 6,677.52 points, while in Paris the CAC 40 added 0.34 per cent to 4,217.22 points. Portugal's PSI 20 index rose 0.98 per cent to finish at 5,854.36 points after news of the EU-backed rescue plan. Portugal will inject 4.4 billion euros into Banco Espirito Santo, national bank governor Carlos Costa announced late Sunday amid fears of a catastrophic bank run. The bank will be split into two entities, with its toxic assets isolated and its healthier assets regrouped in a new Novo Banco, Costa said. Banking shares rallied on the news, with BNP Paribas raising 0.86 per cent to 50.19 euros and Spain's Bankia gaining 0.49 percent. The "bailout for Banco Espirito Santo has helped reduce the risk of banking contagion in Europe so bank stocks are getting some extra relief," said Jasper Lawler, a market analyst at CMC Markets. HSBC also gained 0.91 per cent to 635 pence as investors brushed aside news of a drop in first-half profits. The bank said earnings fell in the six months to the end of June because one-off gains were not repeated and after a weaker showing at its investment arm. Rolls-Royce dipped 0.10 per cent and Siemens fell 0.55 per cent after news that Brussels had cleared the British company's sale of its specialist gas turbine operations to the German engineering giant, according to AFP.