Europe close: Stocks higher even as investors mull political risks
European stocks advanced as oil and metal prices continued rising and some analysts said the risk of political instability in Europe had weakened somewhat over the weekend, although others remained a tad wary.
The benchmark Stoxx Europe 600 index finished higher by 0.25%, Germany’s DAX added 0.19% and France’s CAC 40 was 0.56% higher. However, Italy’s FTSE MIB edged up by 0.19% as bank shares in the country came under pressure.
Oil prices also rose amid growing expectations that OPEC will agree a production cut at its meeting later this week. Brent crude increased 4.31% to $48.97 per barrel and West Texas intermediate was 4.14% higher at $48.36. The Stoxx 600 oil and gas index gained 2.26% while the sub-index tracking Basic Resources closed up by 2.01%.
Technical experts from OPEC made some progress in the first of two days of conversations to try and hammer out the details for a deal to cut their combined production levels, Reuters reported late in the day.
Politics were in focus in Europe as former French President Nicolas Sarkozy conceded defeat after a vote to choose the centre-right candidate, leaving Francois Fillon and Alain Juppe as contenders to become the centre-right´s candidate in next year´s presidential elections.
"[Le Pen´s] presidential hopes mighthave risen after the US election result, but based on the polls released since the US elections,her chances have not. However, deep divisions among the Left, intensified by former economy minister Emmanuel Macron's presidential bid, may discourage left-wing voters from voting. This could conceivably give an advantage to Le Pen. Moreover,a rejection of the Italian referendum and a far-right victory in the Austrian presidential elections on December 4 could add momentum to anti-establishment parties," analysts at Morgan Stanley said.
Meanwhile, in Germany, Chancellor Angela Merkel confirmed that she will run for a fourth term in office.
“The confirmation that Angela Merkel is set to run for a fourth term as German chancellor in next year’s election, combined with a Marine Le Pen-damaging victory for Francois Fillon in the first round of France’s right-wing primaries, has given life to the euro this morning,” said Spreadex Financial Analyst Connor Campbell.
In a speech delivered at the European Parliament in Strasbourg, European Central Bank chief Mario Draghi reiterated the monetary authority´s commitment to maintaining "the very substantial degree of monetary accommodation, which is necessary to secure a sustained convergence of inflation towards level below, but close to, 2% over the medium-term."
On the corporate front, German chip designer Aixtron slumped after a US regulator moved to stop a planned Chinese takeover of the company.
Italian banks were under the cosh, with Banca Popolare di Milano and Banca Popolare dell’Emilia Romagna both in the red amid worries about political stability ahead of the referendum on constitutional reform on 4 December and concerns about whether lenders can raise the capital they need.
In London, profit warnings weighed on outsourcing group Mitie and plastic and fibre products supplier Essentra.
Meanwhile, GlaxoSmithKline edged lower after saying it has filed a US regulatory submission for a new three-drug inhaler treatment for patients with chronic obstructive pulmonary diseases.