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Europe: Optimism over oil output deal powers European shares rally
[MILAN] European stocks rallied on Wednesday, boosted by optimism over a deal to freeze oil output, with French bank Credit Agricole and miner Glencore leading the bounce.
The pan-European FTSEurofirst 300 extended earlier gains to finish up 2.7 per cent after Iran voiced support for an initiative led by Russia and Saudi Arabia to freeze production in an oversupplied market.
"Sentiment has improved, the oil is up and banks are doing better," Stefan de Schutter, trader at Alpha Wertpapierhandels in Frankfurt, said.
"(Iran's remarks) have given a further boost and now the market hopes for a solution."
Iranian oil minister Bijan Zanganeh met counterparts from Venezuela, Iraq and Qatar in Tehran for over two hours on Wednesday, saying a proposed production "ceiling" should be the first step toward stabilizing the market.
"Most of the major oil producing nations are willing to freeze their oil output and if this is backed up by evidence in the coming months then we could be seeing the light at the end of the tunnel soon," said Forex.com analyst Fawad Razaqzada.
The FTSEurofirst 300 has staged a recovery recently, rising 6 per cent in the two sessions before Tuesday's slight drop, partly on a rebound in banking shares. In spite of the rise the index is down 10 per cent year to date due to persistent worries about a global economic slowdown and weak commodity prices.
Credit Agricole was among the strongest performers, rising almost 14 per cent after it beat expectations with its results. The French bank also promised stable investor returns and a solid capital base in the future as it outlined plans to simplify its much-criticised ownership structure.
"Overall it's been a good quarter for them. It looks like they have enough capital and the new ownership structure should be clearer and less convoluted than before," said Clairinvest fund manager Ion-Marc Valahu, who added that he had recently bought into the euro zone banking index.
British miner Glencore climbed 16.6 per cent after announcing the refinancing of its debt, while Schneider Electric surged 9 per cent after reporting higher revenues and earnings.
Shares in Swedish heating technology company Nibe Industrier jumped 6 per cent higher after its results beat market expectations.
However, shares in RWE fell 12.4 per cent after it scrapped its annual the dividend for the first time in decades, as Germany's second biggest utility struggles to hold on to cash following major writedowns.
"Scrapping the dividend is a devastating signal, you couldn't send a worse one," a trader said.
According to Thomson Reuters StarMine data, 52 per cent of the companies on the European STOXX 600 index have met or beaten market expectations with their fourth-quarter results so far, while 48 per cent have missed those expectations.