European shares gain as commodity stocks recover
EUROPEAN shares climbed higher at midday on Wednesday as investors sought bargains after heavy losses in the previous session, with a recovery in crude oil prices supporting beaten-down energy companies.
German carmaker Volkswagen remained volatile after its recent slump on allegations of rigging emissions tests. It fell nearly 10 per cent in early trading before rising 2.6 per cent. It is still down 33 per cent so far this week, with Deutsche Bank saying that the scandal is an “investor’s nightmare”.
A broker said the market was pricing in any foreseeable risk but cautioned from taking position on the stock given the lack of visibility over possible developments.
The market got some support from the energy sector as crude rose 0.1 per cent after falling sharply following a survey showing activity in China’s factory sector shrank to its weakest level in 6-1/2 years. The European oil and gas index rose 1.3 per cent.
“Somewhat surprisingly, the negative reaction to the disappointing Chinese data was very limited indicating that much of the bad news has already been priced in,” Markus Huber, senior analyst at Peregrine & Black, said.
“As the Volkswagen shock slowly fades, general positive economic fundamentals and supportive central bank stances should increasingly lend support to markets.”
The pan-European FTSEurofirst 300 index was up 0.77 per cent at 1,375.78 points by 1011 GMT, with analysts saying that investors were taking the advantage of recent share price declines and finding value in some stocks.
Miners also gained 1.3 per cent after falling to their lowest level since 2009 as prices of copper and nickel advanced.
International Airlines Group rose more than three percent after Morgan Stanley made the Airline operator its overweight pick in the sector, raising its target price and earnings forecasts.
Smiths Group rose two per cent as the British engineering conglomerate reported an in-line set of results following recent earnings misses in the sector.
On the downside, Coloplast fell 6.4 per cent after the Danish healthcare product maker issued its third profit warning this year after setting aside 3 billion Danish crowns for a U.S. lawsuit..
The market showed little reaction to a survey showing euro zone business growth slowed this month as Asian demand weakened, leading to fewer new jobs and forcing factories to reduce output. The slowdown came amid debate on whether the European Central Bank should expand its stimulus programme to have more impact on inflation and growth.