Europe’s financial markets are picking up where they left off at the end of 2013, extending a rally in bonds and stocks that’s making the region’s sovereign debt crisis little more than a fading memory.
Ireland sold bonds this week, returning to financial markets after completing a three-year bailout program. Portugal—another aid recipient—is holding a sale today. Banks in Spain and other periphery countries have never been able to borrow as cheaply as they can now. The Stoxx Europe 600 Index of stocks closed at its highest level since May 2008 yesterday, and the euro is about its strongest since 2011 against the dollar.
“In the last 24 months there has been a progressive reduction in the perception of risk among investors, and we are gradually moving from fear to greed,” said Jacopo Ceccatelli, a London-based partner who manages 2.2 billion euros at financial advisory and asset management firm JCI Capital. “The reduction in the risk perception, and this sort of market euphoria, is leading to a re-rating of sectors and countries most penalized during the sovereign debt crisis.”
The euro, now the currency for 18 nations, rose against all but one of its 16 major counterparts last year as the region’s economy emerged from its longest recession on record. It rose 0.3 percent to $1.3613 today, after touching a two-year high of $1.3893 on Dec. 27.
The availability of funding is giving companies with excessive debt loads more time to restructure. Leveraged loan issuance in Europe surged 44 percent last year, with companies borrowing 56 billion euros of the debt, the most since 2007, according to data compiled by Bloomberg.
Billionaires Bill Gates and George Soros have bought stakes in Fomento de Construcciones y Contratas SA, the money-losing Spanish builder that said in November it has about 6 billion euros of debt. The company said yesterday that 95 percent of its lenders agreed to extend its loans for two months as it works to refinance the debt.