Europe: Shares end little changed after Brexit speech

[MILAN] European shares ended flat on Tuesday, coming off lows after British Prime Minister Theresa May provided some clarity on her country's plans to leave the European Union.

The pan-European Stoxx index ended 0.1 per cent lower, having fallen as much as 0.7 per cent just before Ms May began speaking. Britain's FTSE 100 index fell 1.5 per cent, its biggest one-day drop since June 2016, as sterling surged on May's speech.

Concerns over a "hard" Brexit had been weighing on the pound in recent weeks, helping the FTSE end at all-time highs on Monday after a record 14 straight days of gains.

In a much-awaited speech that had been extensively leaked to media, Ms May said Britain would leave the EU's single market but promised a parliamentary vote on any deal and stressed it would seek to stay a key European partner.

"The fact that May is willing to put the final Brexit deal vote to the Parliament reinforces the possibility of a 'softer' Brexit," said Stephane Ekolo, a strategist at Market Securities.

Deutsche Bank said it viewed the speech as moderately positive for markets following weekend headlines signalling a hawkish stance on immigration and relaxed attitude towards EU tariffs. "Nevertheless, it is not a game changer," it said.

Europe's banking index ended little changed following a volatile session that saw it move from being one of top sectoral losers in Europe to a top gainer.

Within the sector, performances were mixed. Spain's Banco Popular rose 6.6 per cent after an upgrade to "buy" from Citigroup. UniCredit gained 2.7 per cent as Italian banks were underpinned by an upbeat note from Goldman Sachs.

"Since the Italian referendum, market repair has accelerated: while the stock of non-performing loans at banks is likely to take time to revert to average levels, a series of announcements by banks should be positive steps towards market repair," Goldman said in a note.

Elsewhere in the sector, top losers were HSBC, Natixis, down 1.9 and 1.6 per cent respectively.

European banks and other cyclical stocks have rallied recently, helped by a rise in yields fuelled by hopes of fiscal stimulus and regulation cuts in the United States under Donald Trump.

But some investors said signs were emerging that the Trump rally was unwinding. Utilities, which have fallen out of favour since Mr Trump's election, were the biggest sectoral gainer on Tuesday, up 0.7 per cent.

Lufthansa rose as much as 7.3 per cent, attracting interest after an Italian newspaper reported Etihad Airways was interested in taking a stake in the German carrier.

The stock ended off highs, up 4.3 per cent, after two sources familiar with the matter said Lufthansa was in talks with the Abu Dhabi-based company.

Basic resources stocks remained weak, down 0.6 per cent, hurt by lower copper prices. Anglo American, BHP Billiton and Rio Tinto all fell around 2 per cent.

German fashion retailer Zalando fell the most on the biggest Stoxx, down 6 per cent after its sales growth fell short of expectations.

REUTERS