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European shares mixed, weighed down by underperforming periphery
May 26, 2016 / 9:06 AM / a year ago

European shares mixed, weighed down by underperforming periphery

(ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon - see cpurl://apps.cp./cms/?pageId=livemarkets for site in development. See the bottom of the report for more details)

* FTSEurofirst 300 flat, STOXX 600 down 0.1 pct

* Spain, Italy underperform, hit by their banks

* Commodity stocks rally after Brent hits $50

By Alistair Smout

LONDON, May 26 (Reuters) - European shares were mixed on Thursday, with banks in Italy and Spain on the back foot following a recent rally while commodity stocks were boosted as Brent crude oil prices hit $50 a barrel for the first time since November.

The STOXX Europe 600 was down 0.1 percent at 348.06, with the FTSEurofirst 300 flat. Both indexes hit a 4 week high in the previous session.

Britain’s FTSE 100, France’s CAC and Germany’s DAX were all flat to 0.3 percent higher, but peripheral euro zone markets in Spain and Italy fell 1 and 0.6 percent respectively.

Euro zone banks fell 2.3 percent after a strong rally on Wednesday, led down by Banco Popular which slumped 20 percent after it announced a rights issue.

Other Spanish banks Caixabank and Banco de Sabadell fell 4.3 percent and 7 percent respectively, with Italian lenders UBI and Banco Popolare down 5 percent.

Atif Latif, director of trading at Guardian Stockbrokers, said that the rights issue suggested that euro zone banks were “still a major concern.”

“Credit risk concerns, lack of credible asset quality, balance sheet issues and a lack of reserves... all this makes for gloomy reading for those with EU bank exposure,” he said.

However, oil companies rose 0.7 percent after Brent crude hit $50 a barrel, boosted by a drawdown in crude stocks in the United States last week.

The move in the sector was muted, and it remained below highs for the year hit in April.

“When we broke through $30 and when we broke through $40, we were seeing real excitement in the market, but we’ve got a situation where Brent is above $50 but investors don’t believe it is sustainable,” said Tony Cross, market analyst at Trustnet Direct.

“We’ve got the OPEC meeting starting next week, and Canadian supply is starting to come back... there are still uncertainties which can weigh on the oil price.”

The STOXX 600 Basic Resources index was the top sectoral riser, up 2.5 percent as miners benefitted from a rise in the price of copper.

ArcelorMittal, the world’s largest producer of steel, was the biggest gainer in the sector and the broader STOXX Europe 600 index.

It benefitted as Goldman Sachs raised its target price on the stock, and maintained its “conviction list buy” recommendation.

Analysts at the U.S. bank said that consensus estimates looked conservative and its valuation looked attractive given that steel prices should be underpinned by low supply.

Newspaper group Daily Mail and General Trust fell 7.8 percent after it said a downturn in the print advertising market was squeezing margins in its media business, resulting in an 11 percent drop in first-half profit and a lower outlook for the year.

Today’s European research round-up

ADVISORY- Reuters plans to replace intra-day European and UK stock market reports with a Live Markets blog on Eikon (see cpurl://apps.cp./cms/?pageId=livemarkets for site in development). In a real-time, multimedia format from 0600 London time through the 1630 closing bell, it will include the best of our market reporting, Stocks Buzz service, Eikon graphics, Reuters pictures, eye-catching research and market zeitgeist. Breaking news and dramatic market moves will continue to be alerted to all clients and we will continue to provide a short opening story and comprehensive closing reports.

If you have any thoughts, suggestions or feedback on this, please email mike.dolan@thomsonreuters.com.

Mike Dolan, Markets Editor EMEA.

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