Europe: Stocks rise as bank support outweighs oil declines

[FRANKFURT] Banks and miners again provided the main support to European shares amid continued investor optimism about the benefits of a Donald Trump presidency, even as energy-related share stumbled.

UBS Group AG and HSBC Holdings Plc contributed the most to progress as a measure of lenders reached its highest level since January on speculation that Mr Trump may loosen industry regulations. Commodity producers rose as base metals advanced, with Rio Tinto Group and BHP Billiton Ltd adding at least 2.5 per cent.

Total SA and Eni SpA led declines among oil companies as crude fell to a three-month low. RWE AG helped drag utilities to the biggest loss on Stoxx Europe 600 Index, sliding 3.5 per cent after posting a worse-than-estimated third-quarter loss.

The Stoxx 600 added 0.3 per cent at the close of trading, after earlier rising as much as 1.3 per cent. While it closed 0.4 per cent lower on Friday, it still posted its best weekly performance since July amid speculation that Mr Trump will pursue business-friendly policies and ease regulation on industries including banks.

A measure of euro-area stock volatility rose 1.1 per cent today, for a second day of gains. The volume of shares changing hands was about 17 per cent higher than the 30-day average.

"In the near-term, there is probably more uncertainty to play through - that means occasional spikes in volatility," said Frances Hudson, an Edinburgh-based global thematic strategist at Standard Life Investments, which oversees £269 billion (S$477 billion).

"The optimists are looking further out, saying perhaps a business-friendly president would encourage companies to step up investment."

The Stoxx 600 rebounded 2.7 per cent last week following an 11-day streak without notable gains, its longest since 1994. It is still on course for its first annual drop since the height of the sovereign-debt crisis in 2011 amid investor wariness over mixed earnings, the implications of Brexit, as well as the strength of the economic recovery and the willingness of central banks to maintain accommodative monetary policies.

As the earnings season winds down, investors are also assessing company results for indications of the health of corporate Europe. About 61 per cent of Stoxx 600 companies that have reported so far this season have beaten profit projections, while 46 per cent topped sales estimates, data compiled by Bloomberg show. Analysts forecast a 3.5 per cent contraction in net income this year.

Among companies moving on corporate news: Sonova Holding AG rose 1.1 per cent after the hearing-aid retailer forecast a pick-up in sales growth in the second half of the year.

Taylor Wimpey Plc climbed 3.1 per cent after the UK housebuilder reported strong second-half trading.

DCC Plc gained 2.8 per cent after the Irish distributor of products from food to medical devices said annual earnings will be better than market estimates.

Siemens AG climbed 0.8 per cent after agreeing to buy Mentor Graphics Corp for US$4.5 billion to expand its industrial software capabilities. Intrum Justitia AB jumped 7.8 per cent after Europe's biggest debt collector said it is acquiring competitor Lindorff in a US$1.96 billion deal.

BLOOMBERG