Europe: Shares boosted by oil prices, Yellen

[MILAN] European shares touched a one-week high on Tuesday after Federal Reserve Chair Janet Yellen pushed back expectations for a rate increase without raising concerns over the strength of the world's largest economy.

Ms Yellen's remarks late on Monday followed Friday's dismal monthly jobs report, which increased jitters over the ability of the US economy to absorb a rate hike as early as June. She called the jobs report "disappointing", but said "one should not attach too much significance to a single report".

Firmer oil prices also helped sentiment.

"Investors continue to see the glass half-full," JCI portfolio manager Alessandro Balsotti said.

"A good day for oil prices and a balanced speech by Yellen have allowed indexes to shrug off concerns of a slowdown in the US economic cycle."

In spite of the upbeat mood, investors said volatility could increase in the near term as Britain prepares for what looks like a close vote on June 23 over whether to leave the European Union.

"Managing short-term volatility by de-risking is going to be an important consideration for investors ... Global diversification will remain important for UK-based investors," said Rick Lacaille, Global CIO of State Street Global Advisors.

The pan-European STOXX Europe 600 and the FTSEurofirst 300 indexes rose 1.2 per cent and 1.1 per cent respectively, extending the previous session's slight gains and ending at their highest close since May 31.

Germany's DAX outperformed, rising 1.7 per cent after data showed that industrial output in Germany rose more than expected in April. That suggested the motor of Europe's largest economy was humming along at the start of the second quarter.

Among sectoral gainers, commodities-related stocks were in demand. The energy index advanced 2.6 per cent as oil prices hit their highest in eight months, buoyed by the US dollar nearing one-month lows and by falling Nigerian production after attacks on infrastructure.

Royal Dutch Shell was up 3.2 per cent, also helped by news it would sell up to 10 per cent of its oil and gas production, withdrawing from up to 10 countries to cut costs following its US$54 billion acquisition of BG Group.

Shares in shipping and energy group AP Moller-Maersk rose 4.7 per cent, making it the second biggest gainer on the FTSEurofirst, following an upbeat note from Danske Bank.

REUTERS