Shares of Bank of America (BAC), Citigroup (C), and Morgan Stanley (MS) busted out of the gate in pre-market trading on Tuesday, as if trying to prove that their awful performance in 2011 was an aberration. Bank of America was recently up by 3.1%, Citi was up 2.8%, and Morgan Stanley was 3.6% higher. Most big banks ended 2011 down more than 40%.
The cost of insuring against the default of European sovereign debt rose this morning, but CDS protection actually fell for U.S. banks. At Bank of America for instance, CDS spreads fell to 397 basis points from 404 a week ago and nearly 500 in late November, according to Markit. Generally, the cost of CDS protection for the banks has tracked European costs. U.S. banks may be responding to some optimism about economic growth in emerging markets, as gauges of manufacturing activity in China and India both rose.
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