Oil stocks push European bourses higher, SOBI leads gains

German share price index DAX graph is pictured at the stock exchange in Frankfurt
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany August 30, 2021. REUTERS/Staff

September 2, 2021

By Sruthi Shankar and Ambar Warrick

(Reuters) -European shares closed higher on Thursday as expectations of improving economic growth supported oil stocks, while drugmaker Swedish Orphan Biovitrum (SOBI) was the top performer on the STOXX 600 after accepting an $8 billion takeover offer.

The pan-European STOXX 600 index rose 0.3%, with oil stocks adding 1.8% as crude prices surged on optimism over an economic recovery, a sharp decline in U.S. crude stocks and a weaker dollar. [O/R]

SOBI surged 25.8% to the top of the STOXX 600 after it agreed to a takeover by U.S. private equity firm Advent International and Singapore’s sovereign wealth fund GIC.

Travel and leisure stocks rose 0.8% as they recovered from a recent sell-off on concerns over the Delta variant of the coronavirus, while automakers gained 0.3%.

But German luxury carmaker Daimler fell 0.6% after it warned of significantly lower third-quarter sales at its Mercedes unit due to a global semiconductor shortage.

Economy-sensitive industrial goods & services, and the chemical and construction and materials sectors, which were all trading near record highs, rose between 0.3% and 0.6%.

“We find value stocks quite exciting; a lot of the stocks are quite cheap,” said Aaron Barnfather, European equities portfolio manager at Lazard Asset Management.

“But we are quite concerned that expensive stocks…are very vulnerable to any shift in the environment, particularly if we were to see bond yields starting to rise.”

The European stocks benchmark is trading just a few points below all-time highs, with investors holding off on big bets ahead of U.S. jobs data on Friday that could influence the Federal Reserve’s thinking on policy tightening.

The European Central Bank is set to meet next week, with some of the more hawkish members recently calling on the ECB to pare back its pandemic-era bond purchases.

While strong earnings and a relatively high rate of coronavirus vaccinations have supported a European economic recovery, investors are wary that tighter monetary conditions and rising inflation could result in choppier market conditions through the rest of this year.

The STOXX 600 is projected to end 2021 around current levels.

Miner BHP Group fell 5.6% on ex-dividend trading, weighing on the UK’s blue-chip FTSE 100, which rose 0.2%. [.L]

Polish videogame maker CD Projekt rose 11.5% as its first-half results blew past estimates on strong sales of its flagship games “Cyberpunk 2077” and “The Witcher 3: Wild Hunt”.

British engineering firm Melrose Industries gained 7.2% as it reported a first-half profit.

(Reporting by Sruthi Shankar in Bengaluru; editing by Shounak Dasgupta and Mark Heinrich)