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European shares boost with oil prices, Yellen comments

European shares

European shares rose on Tuesday after Federal Reserve Chair Janet Yellen pushed back expectations for a rate increase without raising concerns over the strength of the world’s largest economy.

Yellen’s remarks on Monday followed Friday’s dismal monthly jobs report, which increased jitters over the ability of the economy to absorb a rate hike as early as June. She called the jobs report “disappointing”, but said “one should not attach too much significance to a single report”.

Firmer oil prices also helped sentiment.

“Investors continue to see the glass half full,” JCI portfolio manager Alessandro Balsotti. “A good day for oil prices and a balanced speech by Yellen have allowed indexes to shrug off concerns of a slowdown in the U.S. economic cycle.”

In spite of the upbeat mood, investors said volatility could increase in the near term as a British referendum on June 23 over whether to leave the European Union approaches.

According to surveys, Britons are split on leaving EU.

Rick Lacaille, Global CIO of State Street Global Advisors said, “Managing short term volatility by de-risking is going to be an important consideration for investors … Global diversification will remain important for UK based investors”.

The pan-European STOXX Europe 600 and the FTSEurofirst 300 indexes were both up 1.2 per cent by 1031 GMT, extending the previous session’s slight gains.

Germany’s DAX outperformed, with the share index rising 1.7 per cent after data showed that industrial output in Germany rose more than expected in April, suggesting that the motor of Europe’s largest economy was humming along at the start of the second quarter.

Commodities-related stocks were among sectoral gainers. The energy index advanced 2 per cent, leading sectoral gainers, as oil prices held close to their highest in seven months, buoyed by the U.S. dollar skimming its lowest in nearly a month and by falling Nigerian output.

Royal Dutch Shell was up 2.8 per cent, also helped by news it would sell up to 10 per cent of its oil and gas production, leaving up to 10 countries to cut costs following its $54 billion (£37.05 billion) acquisition of BG Group.

Shares in Natixis rose 3.4 per cent, the top gainer in the FTSEurofirst 300 index, after Jefferies started the coverage of the company with a “buy” rating.

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Paul

The author Paul