Europe: Shares inch up after robust week; Bayer tanks

EUROPEAN shares edged higher on Monday after a strong week driven by aggressive bets on interest rate cuts, while drugs-to-pesticides group Bayer posted its worst day ever weighing on the healthcare sector and Germany’s benchmark index.

The pan-European Stoxx 600 inched 0.1 per cent higher after jumping nearly 3 per cent last week.

As investors started pricing in 100-basis-point rate cuts for 2024 with the first one seen as soon as April, European Central Bank officials shunned market optimism, flagging still-high inflation and a somewhat resilient economy.

“Markets are definitely jumping the gun. There’s going to be a continuous repricing of expectations about that first rate cut- the most important one because of that shift in mentality from central banks,” Daniela Hathorn, senior market analyst at Capital.com.

Energy stocks led sectoral gains, climbing 1.3 per cent tracking firm crude prices as further supply cuts in Opec+ production are expected in the coming weeks.

The healthcare sector eased 0.4 per cent after Bayer fell 18.0 per cent briefly hitting its lowest level in 14 years after aborting a large late-stage trial testing a new anti-clotting drug.

Separate news that the company had been ordered to pay US$1.56 billion in the latest US lawsuit over its commonly used Roundup weedkiller also hurt sentiment.

Germany’s DAX slipped 0.1 per cent.

Meanwhile, data from the region showed producer prices fell along expectations in October, continuing a downward trend after September’s record fall.

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Italian bank stocks gained after Moody’s upgraded the outlook for the country’s sovereign debt in an unexpected boost for Prime Minister Giorgia Meloni’s government.

The FTSE MIB inched 0.2 per cent up.

The risk premium investors ask to hold Italian and Portuguese sovereign debt also fell, reflecting some relief.

“With Meloni coming into government, we’ve seen a stable economic landscape from Italy and the Moody’s upgrade is a move towards stability in the credit market and will improve the positive sentiment,” Hathorn added.

Meanwhile, Spain’s IBEX 35 added 0.8 per cent, extending gains for its sixth straight session.

Among other major movers, Ashtead Group tanked 10.5 per cent after the British equipment rental firm said it expected annual profit below expectations and a more than US$2 billion depreciation charge for the year.

Julius Baer dropped 12.0 per cent after the Swiss bank dampened profit expectations, while Austrian sensor maker AMS Osram lost 4.9 per cent after announcing terms of a fully underwritten rights issue.

Technical products and services provider Diploma topped the benchmark Stoxx 600 with an 11.2 per cent rise after projecting an upbeat full-year margin. REUTERS