World News

European shares reverse course to end higher on defensive plays

By Ambar Warrick and Sagarika Jaisinghani

(Reuters) – European stocks closed higher on Monday after last-minute gains, with buying focused largely on defensive sectors amid plummeting oil prices and continued anxiety over the coronavirus.

The pan-European STOXX 600 index <.STOXX> closed up 1.1%, having dropped about 1% earlier in the day. A stronger open on Wall Street, spurred by optimism over battling the outbreak’s economic impact, also lent support late in the European session. [.N]

Still, the benchmark was a long way from a peak hit in late-February, and likely to record its second-worst quarter ever, owing to the panic selling brought about by the coronavirus.

The healthcare sector <.SXDP> was the biggest boost to the STOXX 600, closing about 3% higher as fears of the coronavirus kept investors trading cautiously. Utilities <.SX6P> and telecom <.SXKP> stocks also rose on the day.

Belgian-Dutch biotech company Galapagos <GLPG.AS> jumped about 6% after Jefferies upgraded the stock to ‘buy’, citing potential in the firm’s lead product.

Energy stocks <.SXEP> shrugged off a slump in oil prices, adding about 3%. However, the gains were meagre compared to what has been lost over the past month, when a crash in prices had seen the sector plumb a 24-year low and prompted widespread scaling back by major producers.

“The demand hit is weighing heavily on oil prices, and European oil & gas majors are responding to the situation by cancelling share buybacks and reducing capital expenditure,” ING analysts wrote in a note.

“These actions, combined with the companies’ robust liquidity and leverage positions should limit the extent of negative credit rating actions.”

Chemical producers <.SX4P> were the best performing sector for the day, rising about 3.9%, with several firms looking to benefit from lower crude prices.

On the other hand, bank stocks <.SX7P> slumped 3.1% as lenders complied with the European Central Bank’s call to freeze dividends in a bid to shore up credit, with the pandemic causing a liquidity squeeze across the bloc.

Spain’s bank-heavy Ibex index <.IBEX> dropped 1.7%.

Travel and leisure stocks <.SXTP>, among the worst hit from the virtual halt in global travel, fell 0.6% on Monday as JP Morgan forecast a 42% slump in aftermarket sales in the European civil aerospace sector in 2020.

London-listed mid-cap stocks <.FTMC> fell as a senior medical officer said the lockdown in Britain could last for months. [.L]

British shopping centre owner Hammerson <HMSO.L> plummeted 22%, bottoming out the STOXX 600 after it suspended its guidance and its 2019 dividend.

(Reporting by Sagarika Jaisinghani in Bengaluru; Editing by Shounak Dasgupta and Ken Ferris)