Europe's Stoxx 600 ends higher as bank stocks cushion oil price hit

[BENGALURU] Europe’s equity benchmark rose on Monday (Oct 12), kicking off a busy week on a strong note as a surge in bank shares helped absorb the hit from higher oil prices.

The pan-European Stoxx 600 index closed 0.65 per cent higher at 635.65 points, posting its second consecutive day of gains.

After weeks of being swayed by broader economic factors such as crude prices and bond yields, investors are expected to zero in on corporate earnings this week.

Strong results could dispel the gloom following renewed tensions in the Middle East. However, France’s LVMH reported worse-than-expected third-quarter organic sales growth, as weak demand for its fashion and leather goods weighed.

Its shares closed 1.18 per cent higher ahead of the report, while the luxury sector rose 0.95 per cent.

Semiconductor equipment maker ASML and investment firm EQT are due to report later this week.

Banks find favour

“In areas such as banking, European and Asian stocks could offer stronger value and return potential than their US counterparts,” analysts at Julius Baer wrote.

Spain’s bank-heavy IBEX jumped 1.33 per cent, the most among regional peers, while the Stoxx 600 banking index advanced 1.5 per cent.

Oil prices were hovering near two-week highs as attacks on Saudi Arabia overshadowed the prospect of increased supplies after US President Donald Trump hailed fresh Russian diesel exports and a Russia-Ukraine ceasefire covering energy targets.

SEE ALSO

Nasdaq falls ahead of earnings, economic data while oil rallies

David Morrison, senior market analyst at Trade Nation, said third-quarter earnings, especially from semiconductor companies and other artificial intelligence beneficiaries, would be key in shaping near-term market sentiment.

Euro zone bond yields eased on Monday, further helping lift sentiment for riskier assets.

However, yields remain near multi-year highs, reflecting concerns that interest rates will stay higher for longer.

Traders currently expect the European Central Bank (ECB) to keep rates on hold at its October meeting, while pricing in a quarter-point rate hike in December, according to LSEG-compiled data.

Still, analysts point to limited scope for further ECB tightening given the eurozone’s weak growth backdrop.

“The euro area cannot point to robust economic growth. That’s simply not the case,” Morrison added.

Among other stock moves, Nordex advanced 3.9 per cent after the onshore wind turbine manufacturer said its project order intake in the third quarter rose 30 per cent year on year.

Vallourec rose 3.8 per cent after the French steel tube maker won a contract from TotalEnergies for the Absheron gas field in Azerbaijan.

Inwit advanced 1.8 per cent after Reuters reported exclusively that the telecom towers company’s leading shareholders were arranging the financing for a potential take-private deal.

Telecom stocks were the biggest laggards, down 0.54 per cent. REUTERS