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May 9, 2018, 12:42 p.m. EDT

European equities climb to 3-month high, boosted by gains for oil stocks

Analyst: ‘The reason why the broader sentiment was not affected could be Trump’s willingness to enter talks’

By Victor Reklaitis and Carla Mozee, MarketWatch


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Anheuser-Busch InBev’s stock is on the rise after the beer maker’s earnings report.

European equities closed at a more-than-three-month high Wednesday, helped by a rally for energy stocks as oil prices gained.

Crude advanced in the wake of U.S. President Donald Trump’s much anticipated decision to withdraw from the Iran nuclear deal and reimpose sanctions on the oil-producing nation — a move that could reduce global crude supplies.

How did markets perform?

The Stoxx Europe 600 index (STOXX:XX:SXXP) gained 0.6% to end at 392.43, led by oil and gas shares. That’s the benchmark fourth straight win and its highest close since Feb. 1, according to FactSet data.

The U.K.’s FTSE 100 (FTSE:UK:UKX) tacked on 1.3% to close at 7,662.52, the best close since Jan. 29. Germany’s DAX 30 (XEX:DX:DAX) added a more modest 0.2% to finish at 12,943.06, and France’s CAC 40 (PAR:FR:PX1) closed up 0.2% at 5,534.63.

The euro (XTUP:EURUSD) bought $1.1858, edging down from $1.1864 late Tuesday in New York.

Check out: 8 reasons to ditch the euro right now

What was driving the markets?

Trump announced on Tuesday that the U.S. was abandoning the 2015 Iran nuclear deal. He hinted at an openness on the part of the U.S. to negotiations, and analysts said that was helping equity markets avoid a sizable selloff. Even so, the withdrawal puts Washington at odds with European allies.

But oil prices jumped as reinstatement of Iranian sanctions could result in tighter global oil supplies because they make it more difficult for Iran to export oil, according to some analysts. Shares of European oil companies followed oil prices higher, sending the Stoxx Europe 600 Oil & Gas (STOXX:XX:SXEP)  up by 2.9% for mark the best sector performance.

European Union officials will seek exemptions for European companies from sanctions the U.S. plans to impose on Iran, The Financial Times newspaper reported on Wednesday.

Encouraging first-quarter earnings reports also were providing a lift on Wednesday.

What are strategists saying?

“The reason why the broader sentiment was not affected could be Trump’s willingness to enter talks if Iran agrees to do so, and/or the prospect of Iran staying in the deal, even without the U.S.,” said Charalambos Pissouros, senior market analyst at JFD Brokers, in a note.

Stocks in focus

Among energy stocks, French oil producer Total (PAR:FR:FP)  rose 1.9%, while Royal Dutch Shell PLC (LON:UK:RDSA) (NYS:RDS.B)  surged 3.4% and BP PLC (NYS:BP)  moved up by 3.9%.

Those stocks climbed as oil benchmarks  rose by nearly 3% during the session.

Airbus SE shares (PAR:FR:AIR)  fell 1.1% following Trump’s policy announcement.

“The U.S. decision to pull out of the Iran Nuclear Agreement means that U.S. licenses will no longer be granted to sell commercial aircraft to Iran. This will impact both Airbus and Boeing, who both announced deals with IranAir and Aseman in the wake of the agreement being signed in 2015,” said Robert Stallard, who covers global aerospace & defense at Vertical Research Partners, in a note.

Airbus is talking with United Airlines about replacing its old 767 fleet, according to a Reuters report on Tuesday , and that could offset the impact the sanctions would have on the Airbus’ deal with Iran, said Stallard. United is also talking to Boeing about replacing its aging 767 fleet, the report added.

Read: U.S. out of Iran deal — Boeing will lose out on $20 billion in business

On the earnings front, Siemens AG shares (FRA:DE:SIE) (OTC:SIEGY)  leapt 3.9% after the industrial conglomerate posted a rise in quarterly profit.

Bper Banca SpA (MIL:IT:BPE)  rallied 8.3%, topping the Stoxx 600, following first-quarter results from the Italian lender.

Meanwhile, Burberry Group PLC shares (LON:UK:BRBY)   (OTC:BURBY)  tumbled 6.1% after Belgian holding company Groupe Bruxelles Lambert (BRU:BE:GBLB) said it sold its entire 6.6% stake in the British luxury goods maker. GBL, run by Belgian billionaire Albert Frère, said the move allows it to further rebalance its portfolio. GBL shares were down 1%.

Novartis AG (SWX:CH:NOVN)   (NYS:NVS)  ended down by less than 0.1%. The Swiss drugmaker is among the companies reacting to reports that they made payments to a consulting company created by Michael Cohen, Trump’s personal lawyer. Novartis essentially said its deal with Cohen’s Essential Consultants has nothing to do with its current management team.

Read: Drugmaker Novartis ties payments made to Trump’s lawyer to former CEO

Click to Play

Will Trump's Iran Bet Pay Off?

After President Donald Trump's big gamble to pull the U.S. out of the Iran nuclear deal, the focus now shifts to Tehran, the Iranian people and America's allies. Gerald F. Seib explains the high stakes. Photo: Getty

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