Europe close: Oil price decline weighs on main stock benchmarks

A drop in crude oil futures pulled the rug out from underneath European equities, but strength in luxury issues and an encouraging reading on German economic confidence lent some support.

The benchmark Stoxx Europe 600 index declined 0.53%, while Germany’s DAX and France’s CAC 40 were both lower by roughly 0.50%.

Meanwhile, oil prices retreated after racking up strong gains in the previous session when Russian President Vladimir Putin told an energy congress in Turkey that the nation was ready to join OPEC in a proposed curb on production.

West Texas Intermediate was off by 1.28% at $50.70 a barrel and Brent crude was down 1.45% to $52.38, contributing to a 1.04% drop in the Stoxx 600's gauge of Oil&Gas shares.

In currency markets, the pound continued to lose ground, sliding 1.92% to $1.2123, against a background of leaked Treasury documents suggesting that leaving the single market could cost the UK £66bn a year in lost taxes.

The spot US dollar index gained 0.79% to 97.65, weighing on metals' prices.

Societe Generale strategist Kit Juckes said: “In real effective terms, sterling is 10% lower than it was in 1992 after leaving the ERM and is now weaker than it was after Lehman. Press comment is now shifting to embracing the positive effects of a weak pound and in due course that’ll be true but any further weakness from here might simply reflect loss of confidence and be bad for UK assets (gilts, equities, house prices, you name it...) in general.”

In corporate news, luxury goods company LVMH rallied after reporting a 4% jump in nine-month revenue on the back of strength in Asia and its perfume business. Peers followed suit, with Burberry, Richemont and Christian Dior all on the front foot.

BP dropped even after announcing that it is shelving its exploration drilling programme in the Great Australian Bight in order to channel capital into more profitable opportunities.

Elsewhere, data released earlier showed German economic confidence picked up surprisingly strongly this month, with the ZEW investor sentiment survey recording its highest reading in four months.

ZEW's October index of investor expectations climbed to 6.2 from 0.5 a month ago and beat the consensus estimate of 4.0.

As well as the headline index, the ZEW survey on the current economic situation edged up to 59.5 from 55.1 a month ago and above the consensus 55.5.

European economist Jennifer McKeown at Capital Economics said that the ESI moving to its highest level in four months suggested that fears about the effects of Brexit were easing, which was offsetting concerns about the wider implications of Deutsche Bank’s troubles.