European shares climb on bank gains, focus turns to earnings season

European shares climbed on Monday, buoyed by gains in the banking sector amidst easing oil prices and speculation of a Russia-Ukraine energy ceasefire. The pan-European STOXX 600 index climbed 0.56% to 635.09 points by 0843 GMT. Spain's bank-heavy IBEX index led the rally, jumping 1.1%, while the STOXX 600 banking sector rose 1.5%.

Oil prices declined on hopes of greater Russian supplies following a US-Russian diesel deal, following reports that Ukraine and Russia had agreed to cease attacks on each other's energy infrastructure. Investors are now focusing on corporate Europe's earnings reports to assess company performance amidst geopolitical uncertainty and higher borrowing costs. Analyst David Morrison noted that third-quarter earnings, especially from semiconductor firms and AI beneficiaries, will be crucial in setting near-term market sentiment.

LVMH's shares edged higher ahead of its earnings announcement after European markets closed. Semiconductor equipment maker ASML and investment firm EQT are set to report their results later in the week. Eurozone bond yields eased, supporting riskier assets, although they remain near multi-year highs due to concerns about prolonged higher interest rates. Traders anticipate the European Central Bank will maintain rates at its October meeting, with only a quarter-point increase expected in December, according to LSEG data.

Despite the positive sentiment, analysts pointed to limited room for further ECB rate hikes given the weak economic growth in the euro zone. Automobile shares increased 0.8%, on track to extend gains from the previous day following China's agreement to reduce exports of hybrid and plug-in hybrid vehicles to the EU. Media stocks were the weakest performers, down 0.6%.

Nordex surged 2.5% after reporting a 30% year-on-year rise in project order intake for its third quarter. Vallourec gained 4% following a contract win from TotalEnergies for the Absheron gas field in Azerbaijan. Inwit rose 3.4% after Reuters reported its leading shareholders were arranging financing for a potential take-private deal.