Europe at 3-Week High as Volatile Oil and Metal Prices Rebound

Lucy Stoeva
26 Feb, 2016
New York City

European markets extended gains on Friday on the back of the gain in resource sector overwhelming inflation data from Germany and France. Wind turbine maker Gamesa posted 85% increase in 2015 net profit. Oil producer Eni cut investments to maintain dividends.

[R]4:00 PM Frankfurt, Germany – European markets extended gains on Friday on the back of the gain in resource sector overwhelming inflation data from Germany and France. Wind turbine maker Gamesa posted 85% increase in 2015 net profit. Oil producer Eni cut investments to maintain dividends.[/R]

European markets extended gains on Friday, despite negative inflation data, as energy and mining shares received a boost from rising oil and metal prices.

Oil futures rose sharply after Venezuela’s oil minister said the country would meet with other oil producers after two weeks.

Brent crude oil futures soared 3.1% to $36.38, while West Texas Intermediate crude oil gained 2.4% to $33.86.

Tullow Oil soared 10.7%, Repsol was up 7.5%, while Statoil, BP, and Royal Dutch Shell advanced more than 3%.

Italy-based Eni surged 5.1% despite a fourth-quarter net loss as the Italian oil producer cut investments to maintain its dividend.

The mining companies, heavily weighted in the major U.K. indexes, also charged higher after prices of copper and aluminum sharply rose.

Glencore gained 8%, BHP Billiton was up 3.8% and Rio Tinto added 3%.

The G20 meeting in Asia also encouraged the positive sentiment as Zhou Xiaochuan, head of China''s central bank, said China has the tools and the ability to sustain its economic development.

In Germany, February inflation fell to -0.2%, compared to 0.4% in January, according to Destatis, the German statistical office.

In France, consumer prices rose 0.2% in February from the previous month, according to Insee. Producer prices, however, declined 0.8% from a month ago due to drop in food and energy prices.

Investors widely expect the European Central Bank to increase monetary stimulus and boost inflation in the euro zone.

In London, FTSE 100 index advanced 74.08, or 1.23%, to 6,086.89.

In Frankfurt, the DAX index added 152.20, or 1.63%, to 9,483.68, while in Paris, the CAC 40 index surged 62.25, or 1.47%, to 4,310.70.

Major indexes in Italy and Spain also recorded gains between 1% and 2%.

Burberry Group Plc climbed 7.5% to 1,269 pence as investors’ expectations built up after the luxury goods makers said it will review its global markets, operations and capital allocation.

Eni SpA surged 5.1% to €12.71 after the Italian oil producer announced a dividend despite its fourth-quarter net loss.

In order to maintain dividends in the environment of sliding oil prices, the company plans to cut investments by 20% in 2016.

Quarterly net loss amounted to €8.46 billion due to a write-down of €4.4 billion related to its stake in Saipem and Versalis.

Production in the fourth quarter rose 14% to 1.88 million barrels per day and reserves increased by 48%.

Gamesa shot up 5.8% to €17.01 after the Spanish wind turbine maker posted an 85% jump in net profit to €170 million for 2015.

Revenues surged 23% to €3.5 billion from the previous year and operating earnings totaled €323 million, with a margin of 8.4%.

New orders increased 17% to 3.88GW and the largest market was India, representing 29% of its sales.

Gamesa expects EBIT of more than €400 million for 2016 and EBIT margin of over 9%.

Royal Bank of Scotland Plc plummeted 7.2% to 226.5 pence, a three-year low, after the bank postponed its dividend and posted annual loss for the eight year in a row.

The bank reported full-year 2015 loss of £1.97 billion due to charges of £2.9 billion for restructuring and £3.6 billion for conduct and litigation costs.

RBS, which is 73% controlled by the U.K. government since 2008, is withdrawing from 25 of the 38 countries it operates in.

Underlying profits dropped to £4.4 billion, from £6 billion a year earlier, largely due to lower interest rates.