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UK Banks Outperform On Improved Brexit Sentiment

05 October 2018 by jbchevrel

Danske Bank (DANBNK) and Italian names led losses in the iTraxx Senior Financial index today. DANBNK (SLAC +11 SUB +22) widened after FT suggested it executed €8.5B mirror trades for Russian clients in just one year (not all necessarily suspicious). The Danish bank announced that it has increased its capital target to 16% from 14-15%, after the regulator has doubled the Pillar 2 add-on from 70bp to 130bp, and stopped its 2018 share buyback program (~40bp in CET1 impact). The stock has fallen -43% since MAR... A wider 10y BTP/DBR caused Italian fins to lag (+5/+8 in sen +9/+15 in sub). Those names are likely to remain under pressure from budget-related headlines. At the opposite end of the spectrum, UK banks outperformed (flattish on day) on continued positive Brexit news. Indeed the EU is set to offer the UK a free-trade deal deeper than any agreement that's gone before but will reject May's demand for frictionless trade. The EU's vision for its future ties with the UK will reportedly contain "c30-40%" of May's pitch for a wide-ranging trade and security deal. Another step toward soft Brexit?