European bank stocks surged to the highest levels in more than a month Friday, with big U.S. lenders rising in pre-market trading, as investors reacted to the completion of rules that will ease the amount of capital banks will need to keep in reserve, allowing for more corporate and consumer lending that should boost profits and dividends.
The European Commission said it will apply the new Basel III bank capital standards in a way that will account for the "specificities" of national markets for member states. In essence, banks will be allowed to phase in the new standards -- which limit the ways they can use their own risk models to lower their capital requirements -- over the next 10 years.
"The consensus agreed to by the Group of Governors and Heads of Supervision completes nearly seven years of work on the Basel III bank capital standards," said U.S. Treasury Secretary Steven Mnuchin. "The reforms standardize the approach, improve the quality and consistency of bank capital requirements, and will help level the playing field for U.S. firms and businesses operating internationally."
The Stoxx Europe 600 Banks index, the sector benchmark, rose 2.75%, the most since April, on the back of a 3.5% gain for Deutsche Bank AG (DB - Get Report) and a 1.05% rise for HSBC (HSBC) , the region's biggest lender. Credit Suisse AG (CS - Get Report) added 4.3%, while its Swiss rival, UBS AG (UBS - Get Report) , was marked 2.44% higher at Sfr17.35 each.
U.S. bank stocks were also trading higher in pre-market, with Goldman Sachs (GS - Get Report) priced for a 0.18% gain, JPMorgan & Chase (JPM - Get Report) marked 0.32% higher, Citigroup (C - Get Report) up 0.28% and Morgan Stanley (MS - Get Report) up 0.38%.
Bank stocks were also boosted by changes in U.S. government bond yields as investors adjusted for the likelihood of faster wage growth from the November jobs report.
Benchmark 10-year U.S. Treasury yields rose 3 basis points overnight to 2.38%, a move that raises the difference between 2-year and 10-year note yields to around 57 basis points.
The U.S. dollar has also been rising for most of the week, gaining more than 1% against a basket of global currencies to trade at a two-week high of 94.02 in anticipation of not only faster rate projections from the Fed, but also the impact of any fiscal stimulus that would come from an agreement on tax reform between Republican lawmakers in the House and Senate.
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