Europe close: Oil prices, profit-taking weigh heavily on markets

European stocks pulled back from a two-week high on Tuesday as plummeting oil prices and profit-taking saw most major indices trade lower.

"Following last week's record highs in US stock indices and this week's German DAX 40 new all-time high, some investors seem to be taking money off the table ahead of option expiries later in the week," said Axel Rudolph, senior technical analyst at IG.

Nervousness ahead of this Thursday's European Central Bank policy meeting was also likely prompting investors to scale back their appetite for risk. The ECB is widely expected to cut rates by 25 basis points.

The Stoxx 600 pan-European benchmark finished Tuesday's session down 0.8% at 520.57, with most major indices in the red with the exception of Madrid's Ibex 35. The Stoxx 600 had risen for previous two sessions to settle at 524.76 on Monday, its highest since hitting a record high of 528.08 on 27 September.

Brent crude was down 5.2% at $73.45 a barrel by the time equity markets closed – its lowest since 30 September – after a report claimed Israel would strike at Iranian military installations instead of its energy facilities. Oil prices have been volatile in recent weeks on concerns that an escalation of conflict could hamper supply from the oil-rich nation.

Economic data in focus

In the UK, hopes of an interest rate cut were also raised after official data showed a decline in wage growth as employers continued to cut payrolls. UK earnings growth fell from 5.1% to 4.9% in the three months to August, its lowest level for more than two years, while the unemployment rate declined unexpectedly to 4% from 4.1% the previous quarter.

Economic sentiment in Germany improved more than expected this month, with economists, analysts and finance professionals turning more positive on the global macro outlook. The ZEW Indicator of Economic Sentiment rose to 13.1 in October, up from an 11-month low of 3.6 in September and higher than the consensus estimate of 10.

Finally, eurozone industrial production posted a robust 1.8% month-on-month increase in August, marking a significant rebound from the 0.5% contraction in July, according to fresh data from Eurostat. However, the August surge, though encouraging, was seen as a temporary boost rather than the start of a broader revival.

Market movers

Swedish telecom equipment maker Ericsson surged 11% as the company reported core earnings and sales above expectations, boosted by demand for its 5G equipment in North America.

UK housebuilder Bellway jumped 8% as it reported a brighter outlook with its forward order book increasing due to easing economic conditions. The news came as the company revealed a 62% slump in annual profits.

Also in London, fintech money transfer platform Wise was also 6% higher after reporting a 17% jump in second-quarter income after a strong rise in customer numbers.

Energy majors were falling sharply on the back of the significant decline in oil prices, with BP, Shell, TotalEnergies and Eni nursing heavy losses.

Mining stocks were also falling, along with copper prices, with London heavyweights Glencore, Anglo American, Antofagasta and Rio Tinto among the worst performers on the FTSE 100. Copper futures were down 1.7% at $4.33 a pound due to a strong US dollar and concerns over the Chinese economy.