European stocks finished higher for the first time in three sessions on Tuesday, with Ocado Group PLC turning in the Stoxx Europe 600’s best performance following a technology deal
The benchmark also was lifted by major oil companies after Royal Dutch Shell—an industry bellwether—provided an upbeat outlook, seen as demonstrating the worst of the crude-price slump is behind the sector.
U.K. banks were in focus after the Bank of England said all seven major British banks passed its stress tests.
What markets are doing: The Stoxx Europe 600 index /zigman2/quotes/210599654/delayed XX:SXXP -1.47% gained 0.6% to close at 387.02, rebounding from its lowest close since Nov. 17, logged on Monday.
The major country-specific indexes were also in a good mood. Germany’s DAX 30 /zigman2/quotes/210597999/delayed DX:DAX -1.56% climbed 0.5% to end at 13,059.53, while France’s CAC 40 /zigman2/quotes/210598409/delayed UK:UKX -0.86% added 0.6% to 5,390.48. The U.K.’s FTSE 100 /zigman2/quotes/210598409/delayed UK:UKX -0.86% jumped 1% to end at 7,460.65.
The euro /zigman2/quotes/210561242/realtime/sampled EURUSD +0.2120% fell to $1.1869 from $1.1900 late Monday in New York, while the pound /zigman2/quotes/210561263/realtime/sampled GBPUSD +0.3238% slipped to $1.3226 from $1.3319 on Monday.
What is driving the markets: The oil sector helped lift European markets, with the Stoxx Europe 600 Oil & Gas index /zigman2/quotes/210599627/delayed XX:SXEP -0.42% up 1.4%. The gain came after Royal Dutch Shell /zigman2/quotes/204253697/delayed UK:RDSB +1.06% /zigman2/quotes/207682964/composite RDS.B -1.55% said it would be canceling its scrip-dividend program—dividends paid in shares in lieu of cash payments—from the fourth quarter of 2017. It also plans to buy back $25 billion worth of shares between 2017 and 2020.
Shell raised its outlook for annual organic free cash-flow to between $25 billion and $30 billion by 2020. Shares climbed 3.7%, making Shell one of the biggest gainers in the Stoxx 600.
Stock movers: Shares of Ocado Group PLC /zigman2/quotes/207225647/delayed UK:OCDO -2.64% surged 21% after Casino Guichard-Perrachon SA /zigman2/quotes/203038848/delayed FR:CO -2.01% said it has signed a deal with Ocado to develop an online shopping platform in France. Casino shares were up 2.3% in Paris.
Siemens Gamesa Renewable Energy SA /zigman2/quotes/205820667/delayed ES:SGRE -5.57% jumped 9.9% after Sweden’s state-owned Vattenfall signed a deal for the wind turbine maker to supply turbines for three new offshore wind farms in Denmark.
Shares in Siemens Gamesa rival Vestas Wind Systems AS /zigman2/quotes/205019303/delayed DK:VWS -5.23% rallied 8.7%.
BOE stress tests: In the U.K., banks were in focus after the Bank of England said Britain’s biggest banks can handle a “disorderly” Brexit. Its stress tests also found the lenders could withstand a severe recession with a collapse in housing prices, doubling of unemployment and a plunge in the pound.
The BOE concluded that none of the U.K.’s big banks need to raise extra cash to boost their capital buffers, making it the first time since 2014 that all seven major lenders have cleared the health check .
The U.K. banking sector, however, traded mixed after the results were out. Barclays PLC /zigman2/quotes/208409333/delayed UK:BARC -2.26% /zigman2/quotes/206581728/composite BCS -0.10% fell 0.1%, and Lloyds Banking Group PLC /zigman2/quotes/202285510/delayed UK:LLOY -2.14% /zigman2/quotes/200709414/composite LYG -0.41% slipped 1%. Royal Bank of Scotland Group PLC gained 1.4%, and Standard Chartered PLC /zigman2/quotes/200125072/delayed UK:STAN -1.26% tacked on 1.1%.
HSBC Holdings PLC /zigman2/quotes/203901799/delayed UK:HSBA -0.17% /zigman2/quotes/208272822/composite HSBC +0.61% climbed 1.3%. Nationwide and Santander UK, which are not part of the U.K.’s FTSE 100 benchmark, were also stress tested.
What are strategists saying: “The Bank of England’s scenario—which included a 33% drop in house prices, the doubling of unemployment, 4% interest rates and a 4.7% plunge in UK GDP—would see the nation’s lenders lose £50 billion in capital but, crucially, come out the other side. Just 10 years ago that figure would have wiped the sector out, showing the progress that’s been made since the financial crisis,” said Connor Campbell, financial analyst at Spreadex, in a note.
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