European stocks close higher after turbulent session

European stocks reversed sharp early losses and rose on Monday as banking stocks rebounded from three-month lows sparked byThe pan-European STOXX 600 index gained 1.0 per cent by the close, after having fallen nearly 2 per cent earlier in the day.UBS +1.3% Deutsche Bank -0.5% BNP Paribas +1.7%Banking shares rose 1.3 per cent after UBS Group’s state-backed takeover of Credit Suisse appeared to close off one source of worry about the global banking sector.

Credit Suisse shares slumped 55.7 per cent after rival UBS said it will pay 3 billion Swiss francs for the 167-year-old bank and assume up to $US5.4 billion in losses.Shares of UBS rose 1.3 per cent after falling as much as 16 per cent in a volatile session. , angering some of the holders of the debt who thought they would be better protected than shareholders.

“If you look at the seniority of both, equity holders should be the first ones to lose their money. Now doubt has been cast on this principle ... markets participants are confused and the decision comes with a lot of uncertainty.”

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