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Europe: Shares rise as mining sector gains offset Brexit, HSBC concerns


[LONDON] European stocks rose on Monday as firmer mining company shares helped offset concerns about Britain's potential exit from the European Union, and a fall in HSBC.

Signs that the European Central Bank (ECB) would try to protect banks from being hit too hard by negative interest rates lifted euro zone banking stocks, with bonds and shares in Italy and Portugal - the focus of recent concern about the health of Europe's financial sector - getting a boost.

The pan-European FTSEurofirst 300 ended up 1.7 per cent. The index is down nearly 10 per cent since the start of 2016 due to concerns about a global economic slowdown.

Britain's FTSE 100 rose 1.5 per cent, underperforming gains of 2 per cent on Germany's DAX and 1.8 per cent on France's CAC.

Mining stocks were among the best performers, with Glencore and Anglo American both climbing by more than 10 per cent, as the price of copper reached a two-week high.

Metals prices were boosted after an uptick in China's steel industry raised the prospect of a revival in metals demand, given China's role as the world's biggest consumer of metals.

Shares in Telecom Italia also advanced after Vivendi increased its stake in Telecom Italia to 22.8 per cent, strengthening its position as the top shareholder.

However, shares in HSBC slipped 0.9 per cent after Europe's biggest bank reported a surprise pre-tax loss of US$858 million and predicted a "bumpier" financial environment ahead.

Analysts also cited uncertainty over Britain's June 23 referendum on whether to leave the European Union - dubbed"Brexit" - as hitting other British stocks, with UK property stocks falling due to concerns that a vote to leave the EU could impact demand for London homes from foreign buyers.

Sterling also fell as bookmaker's odds on Brexit narrowed.

The scale of the reaction on sterling, driven chiefly by the decision of London Mayor Boris Johnson to campaign for Britain to leave the EU, also depressed British government bond prices. "A Brexit would be worse for the UK than for Europe," Royal London Asset Management European equities fund manager, said Andrea Williams, said.

However, Societe Generale analysts said any decision by Britain to leave would be just as harmful for the rest of the EU as it would be for Britain.

"Our own view falls in the very negative camp, with an estimated loss of 0.5-1.0 percentage points per annum to the UK and 0.125-0.25 percentage points for the euro area over a decade. Given that potential growth is estimated at only 1.2 percentage points, a Brexit would be a significant shock to the euro area economy!" they wrote in a note.