Europe's Stoxx 600 ends higher as bank stocks cushion oil price hit

Europe’s Stoxx 600 index ended the day higher, buoyed by a rally in bank stocks that offset the impact of rising oil prices on Monday (Oct 12). The pan-European Stoxx 600 index closed 0.65% higher at 635.65 points, marking its second day of gains. Analysts at Julius Baer noted that both European and Asian stocks may provide stronger value and return potential compared to their US counterparts.

France’s LVMH reported weaker than expected third-quarter organic sales growth, with weak demand for its fashion and leather goods, causing its shares to close 1.18% higher. Semiconductor equipment manufacturer ASML and investment firm EQT were set to report earnings later in the week. The Stoxx 600 banking index gained 1.5%, the highest among regional peers, with Spain’s bank-heavy IBEX jumping 1.33%.

Oil prices remained near two-week highs due to attacks on Saudi Arabia overshadowing the possibility of increased supplies following US President Donald Trump's endorsement of Russian diesel exports and a Russia-Ukraine ceasefire covering energy targets. Eurozone bond yields eased on Monday, further promoting sentiment for riskier assets, although they remain near multi-year highs due to concerns about interest rates staying higher for an extended period.

Traders anticipate the European Central Bank (ECB) to maintain rates at its October meeting, with a quarter-point rate hike expected in December, according to LSEG-compiled data. Limited scope for further ECB tightening is expected given the Eurozone's weak growth backdrop. Notably, Nordex rose 3.9% following a surge in project order intake for the onshore wind turbine manufacturer, while Vallourec increased 3.8% after securing a contract from TotalEnergies for the Absheron gas field in Azerbaijan. Telecom stocks experienced the steepest decline, falling 0.54%.