Europe: British American Tobacco and financials lift stocks after Federal Reserve blow

[BENGALURU] European shares ended higher on Thursday as strong earnings from British American Tobacco and a multibillion dollar merger in the financial sector helped dispel early gloom after the US Federal Reserve played down prospects for several rate cuts.

Providing the biggest boost to Europe's main Stoxx 600 , which closed up 0.5 per cent, was a 7 per cent jump in shares of British American Tobacco after it beat first-half sales forecasts and predicted a stronger second half.

London Stock Exchange Group rose 6.5 per cent to a record high after it formally announced its US$27 billion merger with financial information firm Refinitiv, lifting Europe's financial services index 2.3 per cent and making it the top gainer.

"This seems to be a deal which puts LSE back on the map after a very uncertain period when it was almost bought out and gives it an opportunity to compete with some of the bigger names," said Craig Erlam, senior market analyst at Oanda.

Reuters News' parent Thomson Reuters holds a 45 per cent stake in Refinitiv and will own 15 per cent in LSE after the deal.

The banking sector was boosted by results from European majors Barclays, Standard Chartered and Societe Generale.

Barclays climbed 1.2 per cent after it raised its interim dividend. Asia-focused Standard Chartered was up 3.3 per cent following strong first-half profits and France's SocGen gained 5.8 per cent after it hit its solvency target a year early.

European markets opened in the red following overnight weakness on Wall Street and Asian markets after the Federal Reserve cut interest rates, as expected, but disappointed investors hoping for a clear sign of several more cuts to come to support growth and stock market valuations.

The dent to sentiment from the Fed hurt commodities markets, with a fall in iron ore, copper and oil prices pulling down shares of mining and energy majors.

The oil and gas sector slid 1.5 per cent, hit by a slump in shares of Royal Dutch Shell after its second-quarter profit dropped to a 30-month low on weaker gas prices and refining margins.

The materials index, down 3 per cent, recorded its biggest percentage fall since December 2018, with London-listed shares of Rio Tinto slipping despite the company reporting a 12 per cent jump in first-half profit and declaring a bumper dividend.

As a result, London's FTSE 100 lagged its European peers. Adding to the gloom there, the Bank of England lowered its growth forecasts for Britain in the face of growing Brexit worries and a slowing global economy. The UK-exposed midcap FTSE 250 was down 0.2 per cent.

REUTERS