European shares rose on Monday as heavyweight oil and gas players were supported by higher crude prices and merger talks in major French utilities saw the sector outperform regional peers.
The pan-European STOXX 600 index rose 0.5%, adding to mild gains from the prior week amid some optimism over COVID-19 treatments. A British market holiday seemed likely to keep trading volumes subdued for the day.
The STOXX 600 was set to add nearly 4% for August. Still, it remains way off pre-pandemic highs as middling economic data and a resurgence in COVID-19 cases put the index in a roughly 30-point trading range since June.Suez (SEVI.PA) topped the STOXX 600 after larger peer Veolia (VIE.PA) offered to buy a 29.9% stake in the French water and waste firm from gas and power utility Engie (ENGIE.PA) for 2.9 billion euros.
Suez jumped nearly 20% and was set for its best day ever, while Veolia and Engie added about 3.6% and 6%, respectively. Their gains spurred a more than 1% rise in the European utility sector .SX6P, which outpaced its regional peers.
Oil and gas stocks .SXEP rose more than 1% as hopes of more global stimulus measures and a recovery in Chinese demand propped up crude prices. [O/R]
Activity in China’s services sector expanded at a much faster pace in August, official data showed, as demand across the economy continues to recover from a coronavirus-induced slump.
China-sensitive sectors such as automobiles .SXAP and resource miners .SXPP also rose. Both sectors depend on the country for their supply chains and is a major market as well.
Hopes of more accommodative measures by major central banks, in line with the U.S. Federal Reserve’s stance last week, also supported the outlook for equities.
“We see the move in Fed policy as confirming an important shift that could also put pressure on other central banks — such as the European Central Bank — to tolerate higher levels of inflation,” Mark Haefele, chief investment officer at UBS Global Wealth Management, wrote in a note.
German stocks .GDAXI rose about 0.6%, ahead of preliminary inflation data for August, due later in the day. Inflation readings for the EU bloc are also due later in the week, and are expected to be far below the ECB’s target rate.