European shares snap three-day losing streak as oil prices retreat

[BENGALURU] European shares rebounded after an early wobble on Monday (Mar 16) as oil prices eased, offering some relief to investors stung by the escalating conflict in the Middle East.

The pan-European Stoxx 600 index closed 0.44 per cent higher after falling as much as 0.45 per cent earlier in the session. It snapped a three-day losing streak, thanks to gains of 1.48 per cent and 1.2 per cent in real estate and energy shares, respectively.

Investors have been highly sensitive to crude prices, which have soared since the US and Israeli strikes on Iran began more than two weeks ago. But the prices eased on Monday on hopes that more ships would be allowed to pass through the Strait of Hormuz, a vital artery for global oil shipments.

“The market seems to be counting on a US president who in the past has consistently shown a relatively low tolerance to adverse financial market movements,” said Richard de Chazal, macro analyst at William Blair.

“It is hoping he decides to end the conflict sooner... before too much domestic economic damage takes place ahead of the important midterms.”

Packed central bank week

Attention is also shifting to a busy slate of central bank meetings this week, where policymakers will have a chance to outline how recent events are shaping their outlook and give investors fresh clues on how to position.

“Given that the conflict is only two weeks old, policy will be on hold, and therefore the focus will be on updated economic forecasts from the Federal Reserve and from the European Central Bank (ECB),” said Jeremy Batstone-Carr, European strategist at Raymond James.

“More particularly, the market’s focus will be on the accompanying statement and the tenor of the press conferences held by (Fed chair) Jerome Powell and (ECB) president Lagarde and (Bank of England governor) Andrew Bailey.”

Investors have rapidly trimmed rate cut bets on fears that the oil supply shock could boost crude prices and push inflation higher, forcing central banks to delay easing.

SEE ALSO

European shares log second week of losses as Middle East war fuels inflation fears

Among individual stocks, Commerzbank rose 9 per cent after Italy’s UniCredit launched a bid to increase its stake in the German lender. UniCredit shares were marginally higher.

Italian hearing aid group Amplifon’s shares declined nearly 14 per cent to a nine-year low after it announced plans to buy Denmark’s GN Store Nord’s hearing business for 2.3 billion euros (S$3.4 billion).

Separately, Goldman Sachs raised its target for Britain’s FTSE 100 for the next 12 months to 10,800 points from 10,400 points. REUTERS