European shares near record high as lower oil prices boost sentiment
The banking sector rose 1.7%
On Tuesday (Nov 10), European stocks edged close to a record high, buoyed by a persistent decline in oil prices and decreasing chances of a US-Iran military confrontation. The Stoxx 600 index rose by 0.27 percent to 658.32 points, with banking shares advancing 1.7 percent and specific sectors posting strong gains. Spanish banks led the performance, gaining 0.98 percent.
The pan-European index remained just 0.8 percent away from its record high, attained in early August, driven by optimism that reduced Middle East tensions could alleviate energy-induced inflation concerns and postpone the likelihood of higher interest rates. While investors have been frequently assured of a quick resolution to the conflict, Democrats' victory in US Congress during the midterms last week has bolstered hopes for a swift end.
Brent crude oil prices plummeted to a two-month low subsequent to US officials downplaying the necessity for additional military action against Iran. Analysts pointed out that European equities are comparatively much cheaper than their US counterparts, which has contributed to the upbeat sentiment. David Morrison, a senior market analyst at Trade Nation, remarked, "Valuations across European equities and the indices are much, much cheaper than the US by a significant degree... investors are looking at corporations in the UK and Europe, and they see bargains there."
A more robust-than-anticipated corporate earnings season has aided the rally, with European companies, particularly those with lower exposure to artificial intelligence stocks, experiencing gains amid uncertainty surrounding the sector. The earnings growth disparity between Europe and the US narrowed to its lowest level in over three years this reporting season, with Europe matching or surpassing the US in six sectors, as per Deutsche Bank.
For the third quarter, earnings growth is projected to increase by 25 percent, up from an initial estimate of approximately 16 percent, as per LSEG data. Among individual stocks, Edenred surged 6.4 percent to the top of the Stoxx 600 index following a court decision suspending part of new meal voucher rules for companies in a local lobby group, including Pluxee and Edenred's Ticket.
However, not all stocks performed positively; Potash producer K+S fell 4.5 percent despite delivering better-than-expected third-quarter earnings. Sunrise Communications declined 4.1 percent after presenting its quarterly earnings. Oil-related stocks were the most underperforming, experiencing a 1.6 percent drop. Meanwhile, investors anticipate the European Central Bank to delay any rate hikes until after the year-end, despite the recent decrease in oil prices.
In the US, the October CPI reading exceeded expectations, reinforcing the likelihood that the Federal Reserve would raise interest rates at its subsequent meeting.
Written by urgent.news from The Business Times - Companies & Markets's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
