Europe: Shares lose steam as oil stocks, Bayer drag

[BENGALURU] European stocks handed back most of their early gains to close slightly higher on Thursday, as a slide in oil majors and German drugs company Bayer offset a slew of positive earnings reports.

After rising as much as 0.9 per cent, the pan-European Stoxx 600 ended 0.2 per cent higher, fading as oil prices slumped 5 per cent on a worsening demand outlook as coronavirus cases rise.

Total, BP and Royal Dutch Shell fell between 2.4 per cent and 3.8 per cent, while the oil & gas index slid 1.7 per cent, the biggest decliner among sectors.

European countries have seen a resurgence in Covid-19 cases, with Madrid set to become the first capital to go back into lockdown, while British health minister Matt Hancock introduced more coronavirus restrictions across a wider area of England.

"Second wave effects carry a lot of uncertainty about the growth environment," Bert Colijn, senior economist for the euro zone at ING, said in a note.

"A new round of more national lockdowns could have a serious impact on the labour market again, which is not our base case, but cannot be ruled out either." The European Union's statistics office, Eurostat, said unemployment in the bloc rose to 8.1 per cent of the workforce in August from 8 per cent in July, continuing an upward trend caused by the economic downturn triggered by the pandemic.

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A separate survey showed the recovery in euro zone manufacturing activity was largely as expected in September.

Globally investors clung to hopes of a fresh round of stimulus to prop up the US economy amid growing uncertainty about the November presidential election.

German stocks slipped 0.2 per cent, weighed down by a 13.1 per cent slump in Bayer after it flagged that adjusted profit may slip next year and it may have to write down the value of agriculture assets by close to 10 billion euros.

Among the bright spots, H&M surged 6.1 per cent as it beat third-quarter profit forecasts and announced plans to close hundreds of stores next year as the coronavirus crisis drives more shoppers online. The retail index rose 2.5 per cent to lead sectoral gains.

STMicroelectronics jumped 6.9 per cent after it forecast 2020 sales above previous estimates and said a sharp rise in automotive and microcontroller demand helped preliminary results.

Banco BPM gained 4.2 per cent after sources told Reuters that France's Credit Agricole was exploring a possible deal to buy Italy's third biggest bank.

REUTERS