By Sruthi Shankar and Devik Jain
(Reuters) -European shares rose on Tuesday, lifted by rallying oil stocks after a rout in the previous session, as investors looked toward the next batch of data for clues on the health of the continent amid mixed signals from policymakers on the path of interest rates.
The pan-European STOXX 600 index closed 0.7% higher after hitting its strongest levels in three months earlier in the day.
Oil and gas stocks climbed 4.8%, recouping losses suffered in the last four sessions, as crude prices rose after top exporter Saudi Arabia said OPEC+ was sticking with output cuts and could take further steps to balance the market. [O/R]
The STOXX 600 index has rallied nearly 15% from its September lows boosted by a host of factors including better-than-feared earnings despite growing concerns about a recession in the euro zone.
“It might well be a bear market rally (and) we could come back down from here. Now, are we going to revisit new lows? I don’t think we will unless there is a real change in deterioration in the macroeconomic landscape, more pronounced slowdown particularly in the U.S.” said Julien Lafargue, chief market strategist at Barclays Private Bank.
All eyes are on now on the U.S. Federal Reserve’s November policy meeting minutes due to be released on Wednesday for their rate hiking plans after softer U.S. inflation data for October spurred hopes of less-aggressive policy action.
Meanwhile, mixed signals came from European Central Bank officials, with Bundesbank President Joachim Nagel opening the door to smaller interest rate increases but adding there was still a long way to go in raising borrowing costs.
On the other hand, Austria’s central bank chief Robert Holzmann said he would favour a third straight 0.75 percentage hike. Economists expect a 50 bps move, according to a Reuters poll.
“The ECB position is very tricky one… you have very divergent macroeconomic landscape across the European Union. Our view is the ECB will struggle to hike rates meaningfully. It might be able to go up to 3% but that feels a bit like a stretch,” Lafargue said.
Italy’s blue-chip index rose 1% after the new right-wing government signed off on its first budget, a 35 billion euros ($35.84 billion) package focusing on curbing sky-high energy bills and cutting taxes from next year for payroll workers and the self-employed.
Among individual stocks, Repsol gained 6.8% after RBC raised upgraded the Spanish energy company’ stock to “outperform”.
Thyssenkrupp shed 4.3% after activist fund Cevian cut its stake in the German submarine-to-steel group to less than 1%.
The euro area’s S&P Global flash estimate for November activity is due on Wednesday, while a preliminary reading on inflation is scheduled next week.
(Reporting by Sruthi Shankar and Devik Jain in Bengaluru; editing by Shinjini Ganguli and Bernadette Baum)
