Global Markets Broadly Calmer Despite

Concerns over a major Portuguese lender continued to reverberate Friday, with one of the country's industrial conglomerates shelving the stock listing of its African arm and some higher risk bond issues being put on ice, but global markets were broadly calmer.

Mota-Engil Africa said on Friday that it had postponed plans for its initial public offering in London citing "recent significant deterioration in market conditions and the resultant impact on investor sentiment."

Much further afield, Trade & Development Bank of Mongolia, was also forced to pull its planned dollar-denominated bond sale due to market shocks, following concerns over Banco Espírito Santo SA, demonstrating how the ructions have affected investor sentiment. It had started marketing the paper to investors in the previous day.

Already on Thursday Rottapharm SpA had delayed its Milan stock listing while Spanish construction group Actividades de Construccion y Servicios and Banco Popular Español SA postponed bond deals.

But following abrupt losses Thursday, broader Portuguese and other European markets picked up. The Stoxx Europe 600 added 0.2% in early trade Friday, as did the major indexes in the U.K., Germany and France.

In Southern Europe Portugal's PSI 20 rose a little less than 0.1% having dropped more than 4% in the previous session. Spain's IBEX added 0.1%.

"While [events in Portugal] may well represent an excuse to book profits, we stress that this is an idiosyncratic event," Steven Saywell, a currency strategist at BNP Paribas, wrote in a note. "Sure peripheral spreads in euro zone are wider and the Eurostoxx banking index has come off hard. But by contrast, U.S. banking stocks are holding in pretty well," he said.

Yields on Portuguese 10-year debt were steady at 3.91%.

The selloff on Thursday originated from Banco Espírito Santo SA.

Shares in the Portuguese lender had been under heightened pressure since May, when the bank disclosed that an audit ordered by Bank of Portugal into Espírito Santo International SA, the conglomerate that indirectly holds a stake in the bank, had found Espírito Santo International was in a "serious financial condition" and had uncovered accounting irregularities.

But the declines mounted drastically this week after investors learned Espírito Santo International had delayed coupon payments relating to some short-term debt securities.

Trading in Banco Espirito Santo's controlling shareholder, Espirito Santo Financial Group SA, listed in Luxembourg and Lisbon, was also suspended earlier Thursday and remained suspended in early trade Friday.

"The unfolding story about the liquidity concerns at Espirito Santo International are having implications well beyond the credit asset classes within Portugal, including a broader selloff in other periphery markets," Barclays economists wrote in a note. They added however, that "from the point of view of the banking system as a whole, notwithstanding any further bad news' the sovereign financial implications are likely to remain limited.

The market stabilization was reflected in assets perceived to be safe investments in times of stress too.

After hitting a near fourth-month high Thursday, gold edged 0.1% lower to trade at 1,338.10 a troy ounce. The yield on the 10-year German bund rose to above the 1.2% mark, having hit 1.17% Thursday marking a two-year low. Yields rise as bond prices fall.

Currency markets were steady Friday too, with the euro trading at 1.3604 against the U.S. dollar, reversing Thursday's marginal weakness. Japan's yen was broadly unchanged against the dollar too, at 101.29.

Write to Josie Cox at [e-mail]

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