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Europe close: Stocks rally as gas prices ease, amid US debt ceiling truce

By Alexander Bueso

Date: Friday 08 Oct 2021

Europe close: Stocks rally as gas prices ease, amid US debt ceiling truce

(Sharecast News) - European stocks staged a sharp rebound from the previous session's heavy losses as concerns around gas prices and the US debt ceiling gave some respite to investors.
"US markets have joined their European counterparts in the green today, with fears over a energy driven spike in inflation easing after a second day of downside for natural gas prices," said Josh Mahony, senior market analyst at IG.

"Treasury yields do continue to rise, highlighting how we remain within a position where the short-term fears are easing and inflation continues to bring expectations of monetary tightening. That sweet spot of a strong economy and higher rates tends to provide the basis for outperformance in the financial sector, and thus it is not surprise to see the likes of Standard Chartered and HSBC on the rise today."

The pan-European STOXX 600 index was up 1.6% at 458.57 with all regional bourses higher, led by a 2.14% rally in Madrid's Ibex 35 to 8,962.8. Oil prices reversed an earlier big drop but Dutch TTF gas futures for November finished down 11.18%.

In the background, euro/dollar was little changed at 1.1562 even as benchmark 10-year US Treasury yields continued to push higher.

On the US debt ceiling front, overnight US Senate Republican Leader Mitch McConnell announced plans to extend the borrowing limit into December.

"Progress on debt ceiling talks in the US seems to suggest a temporary deal to avoid default, which gave markets a shot in the arm as the trading session progressed," said Interactive Investors Richard Hunter.

"At the same time, indications that Russia may be stepping up gas supplies also steadied energy prices, which have been the main culprit for the volatility which is currently being experienced."

In economic news, German industrial output slumped by more than expected in August as supply chain disruptions weighed on Europe's largest economy. Output fell 4% month-on-month after a 1.3% rise in July and a severe drop from the 0.4% decline forecast.

Asia focused lenders StanChart and HSBC did well amid news of a possible meeting between US President Joe Biden and Chinese leader Xi Jinping later in the year.

In equity news, French luxury goods maker Hermes jumped 3.1% after HSBC upgraded the stock to 'hold', driving rises in sector peers LVMH, Richemont and Kering.

French car parts maker Valeo climbed 5.89% after Citigroup upgraded the stock, citing limited downside risks as much of the auto production expectations have been revised.

Royal Dutch Shell added 1% after reporting a $400m hit to earnings from soaring gas and electricity prices and Hurricane Ida, but noting that the same price rises would boost third quarter cash flow.

Swiss construction chemicals maker Sika climbed 3% after reporting it could overcome rising raw material costs and supply chain restrictions to increase its sales and profit margins this year.

TeamViewer shares continued to plunge, hitting the bottom of the Stoxx with a fall of 9.26% after a 25% slump on Wednesday, on the back of weak quarterly earnings and a cut to full-year guidance.


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