Europe close: Stocks end mixed, but oil majors' shares sought out

European shares opened higher on Monday driven by energy stocks, but gave back early gains, in part following data showing that Germany's trade balance fell into a surprise deficit in May.

Global growth concerns also dragged on risk appetite.

"Equities have started the second half of the year mixed even as economic slowdown concerns took a leg up on Friday with the U.S. ISM manufacturing data indicating a broad-based weakness," analysts at Saxo said.

"Metals and grains extended their declines on Friday as demand destruction fears continued to escalate, while crude oil remained mixed with OPEC supply concerns still prevalent."

The pan-European Stoxx 600 index was up almost 1%, with all major bourses higher. Britain's oil-and-gas-heavy FTSE 100 outperformed the broader benchmark, gaining 1.1%, but Germany's Dax drifted lower by 0.31% to 12,773.38.

Spain's Ibex 35 and FTSE Mib were little changed alongside but in the red.

Trading volumes were thin due to the Independence Day US market holiday.

Yields on the benchmark 10-year Italian government bond were 14 basis points higher alongside and front-dated Brent was ahead by 1.98% to $113.61 a barrel alongside.

According to the Federal Statistics Office, German exports were down 0.5% in May, while imports rose 2.7% on a calendar and seasonally-adjusted basis, when compared with April.

In total, Germany exported goods worth €125.8bn and imported goods worth £126.7bn, giving it a trade deficit of €1.0bn compared to a revised surplus of €3.0bn in April. Analysts had been expecting a surplus of around €2.7bn.

It was the first time the Eurozone’s largest economy – which is heavily reliant on exports – has reported a monthly deficit since 1991.

Also impacting on financial markets, Bundesbank chief, Joachim Nagel, said on Monday that the ECB should only use its tools to limit sovereign bond spreads in the euro area in exceptional circumstances and under narrowly defined conditions, Bloomberg reported.

In another announcement, in July investor morale in the eurozone fell to its lowest level since May 2020, pointing to an "inevitable" recession in the 19-country currency bloc, said research group Sentix.

Its index for Eurozone investor confidence fell to a worse-than-expected -26.4 from -15.8 in June. Sentix managing director Manfred Huebner said "the energy crisis … is leading to considerable economic distortions."

“In every respect, the dynamics are reminiscent of the crisis year 2008, and what was then the collapse of the financial system is now the danger of the collapse of the European energy supply," he said.

In equity news, BP, Lundin Energy, Shell, TotalEnergies, Equinor and Aker BP were all higher.

On 1 July, analysts at JP Morgan mused out loud regarding the possible implications of instituting a price cap on Russian oil exports.

Under a worst case scenario, Russia would decide not to play ball and slash its output by 5.0m barrels a day, pushing oil prices to $380 a barrel. If the cut were of 3.0m b/d then prices would hit $190, JP Morgan analysts estimated, Bloomberg reported.

Shares in French care home group Orpea were higher after the scandal-hit company announced a boardroom shakeup, after allegations of financial wrongdoing.

Shareholders at its annual general meeting would be asked to appoint five new directors for a four-year term, four of whom will be independent. One of those four is Guillaume Pepy, chairman of Initiative France and former chairman and chief executive of the state railway firm SNCF.

Grafton Group slid 7.7% after the building materials supplier said Gavin Slark would step down as chief executive officer after 11 years in the role.