European shares log weekly gains as oil prices ease, Mideast tensions linger

EUROPEAN shares snapped a three-week losing streak on Friday (Sep 25) as oil prices retreated for most of the week, although investors remained cautious about developments in the Middle East and surging bond yields.

The pan-European Stoxx 600 closed 0.4 per cent higher on Friday, adding to the week’s 0.5 per cent advance. It was also the index’s biggest weekly gain since early August. In the previous three weeks, the index had lost around 3 per cent.

Oil prices fell again on Friday as truce hopes outweighed Houthi attacks on Saudi Arabia.

Negotiators are exploring a phased path out of war that would involve Teheran reopening the Strait of Hormuz and Washington lifting its economic blockade of Iran, sources close to the talks said this week.

“Even though the conflict in the Middle East seems like it’s potentially reaching a positive phase of dialogue and agreement, there’s still a lot of uncertainty because we’ve been here before,” said Daniela Hathorn, a senior market analyst at Capital.com.

Energy shares fell 1.3 per cent and were the biggest sectoral losers.

By contrast, oil-price-sensitive airline stocks advanced, with Ryanair and Lufthansa gaining more than 2 per cent each. The travel and leisure index rose 0.8 per cent.

The biggest boost came from heavyweight banks, which were the top gainers, up 1.3 per cent. Financial services followed with a 1.1 per cent rise.

Shares of banking major UBS rose 3.5 per cent. A Semafor report said the bank had revived discussions to exit Switzerland.

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Euro zone government bond yields were on track for their seventh consecutive weekly rise as crude prices remained near US$100 a barrel and increasingly hawkish signals from central banks pushed up expectations for policy rates.

With market moves increasingly intertwined with oil prices, a retreat to below US$100 a barrel earlier this week helped global equities stage a rally, though it fizzled out on Wednesday.

“Absent a shock or surprising economic or political developments, the Stoxx 600 could continue to grind higher through year-end,” said Paige Henderson, senior portfolio manager and head of the resilient global equity team at Allspring Global Investments.

Though Henderson warned that higher-for-longer oil prices could pressure interest-rate expectations, posing as a headwind for equities. The ECB lifted interest rates earlier this month.

Separately, German consumer sentiment weakened more sharply than expected heading into October, as rising energy prices soured households’ income outlook, a survey showed.

Among individual stocks, Finland’s Konecranes jumped to the top of the Stoxx 600, up 7.4 per cent after the industrial equipment maker launched a buyback programme and raised its financial targets.

Glencore PLC rose about 2 per cent after UBS upgraded its rating on the miner’s stock to “buy” from “neutral”. REUTERS