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Italy Helps European Stocks Stage a Modest Recovery But Growth Worries Linger

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  • Italy Helps European Stocks Stage a Modest Recovery But Growth Worries Linger

European shares rose modestly at the end of a volatile week, led by rebounding banks and technology stocks, while Italian equities rallied as bond yields fell.

The pan-European STOXX 600 was up 0.4 percent by 0940 GMT, while Italy’s FTSE MIB .FTMIB outperformed with a 0.8 percent rise.

The European index was still set for its second straight week of losses as investors’ concerns about slowing global growth, weak earnings, and a U.S.-China trade war drove them away from the region’s equities.

“The market seems to still be concerned about the growth outlook and this comes along with a lot of discussions that we have on politics,” said Britta Weidenbach, Europe portfolio manager at German asset manager DWS.

“The U.S.-China trade conflict, Brexit negotiations, Italy to some extent, all of this is causing worries that companies will further delay their investment decisions.”

Growth-sensitive oil and mining sectors were the worst-performing on Friday.

Italian banks climbed after a media report that Italy’s EU Affairs Minister Paolo Savona is considering resigning over the government’s decision to challenge European Union budget rules. Savona denied the report.

Italy’s banks’ index .FTIT8300 climbed 1.9 percent as bond yields slid, boosting lenders who have large sovereign bond portfolios.

Banco BPM’s (BAMI.MI) shares rose 3.4 percent, while Mediobanca (MDBI.MI), Unicredit (CRDI.MI), UBI Banca (UBI.MI), and Intesa Sanpaolo (ISP.MI) gained 1.6 to 2.6 percent.

Renault (RENA.PA) shares rose 2.8 percent after Deputy CEO Thierry Bollore said he would safeguard the carmaker’s interests in its alliance with Nissan (7201.T), following the ouster of Carlos Ghosn as Nissan chairman over financial misconduct allegations.

Jefferies analysts upgraded Renault shares to “buy”, writing: “The most likely outcome from the current crisis, in our opinion, is a re-balancing of the Alliance with cooperation continuing and Renault reducing its stake to a “fairer” level.”

The carmaker’s shares dropped 8.4 percent on Monday when CEO Carlos Ghosn was arrested over allegations of financial misconduct.

Telecoms equipment makers Ericsson (ERICb.ST) and Nokia (NOKIA.HE) climbed 2.5 and 1.5 percent respectively as traders saw a positive read-across from a Wall Street Journal report that the U.S. government is asking allies to shun telecoms equipment from China’s Huawei HWT.UL.

Earnings disappointments drove the biggest losses on the STOXX.

Shares in stone wool insulation maker Rockwool (ROCKb.CO) dropped 9.9 percent after its third-quarter results.

German industrial machinery group GEA (G1AG.DE) fell 13.4 percent after it cut its outlook for 2018 cashflow margin.

Industrials firms have delivered weaker results as the slowdown in European growth, and trade war fears, hit those most vulnerable to the cycle first.

Data on Friday showed Germany’s economy saw its first quarterly contraction since 2015 in Q3, driven by weaker exports.

Overall expectations for 2018 earnings growth in European stocks have fallen recently as investors price in a weaker economy.

“Markets do look really attractively priced by now, but the question is about the earnings,” said Weidenbach.

“For next year consensus (earnings growth) is still at around high single digits, but certainly there are some clouds in the sky that might make the consensus a little bit too optimistic because of the economic environment,” she added.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Crude Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

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Oil

Oil Dips Below $62 in New York Though Banks Say Rally Can Extend

Oil retreated from an earlier rally with investment banks and traders predicting the market can go significantly higher in the months to come.

Futures in New York pared much of an earlier increase to $63 a barrel as the dollar climbed and equities slipped. Bank of America said prices could reach $70 at some point this year, while Socar Trading SA sees global benchmark Brent hitting $80 a barrel before the end of the year as the glut of inventories built up during the Covid-19 pandemic is drained by the summer.

The loss of oil output after the big freeze in the U.S. should help the market firm as much of the world emerges from lockdowns, according to Trafigura Group. Inventory data due later Tuesday from the American Petroleum Institute and more from the Energy Department on Wednesday will shed more light on how the Texas freeze disrupted U.S. oil supply last week.

Oil has surged this year after Saudi Arabia pledged to unilaterally cut 1 million barrels a day in February and March, with Goldman Sachs Group Inc. predicting the rally will accelerate as demand outpaces global supply. Russia and Riyadh, however, will next week once again head into an OPEC+ meeting with differing opinions about adding more crude to the market.

“The freeze in the U.S. has proved supportive as production was cut,” said Hans van Cleef, senior energy economist at ABN Amro. “We still expect that Russia will push for a significant rise in production,” which could soon weigh on prices, he said.

PRICES

  • West Texas Intermediate for April fell 27 cents to $61.43 a barrel at 9:20 a.m. New York time
  • Brent for April settlement fell 8 cents to $65.16

Brent’s prompt timespread firmed in a bullish backwardation structure to the widest in more than a year. The gap rose above $1 a barrel on Tuesday before easing to 87 cents. That compares with 25 cents at the start of the month.

JPMorgan Chase & Co. and oil trader Vitol Group shot down talk of a new oil supercycle, though they said a lack of supply response will keep prices for crude prices firm in the short term.

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Crude Oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

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Crude oil

Oil Prices Rise With Storm-hit U.S. Output Set for Slow Return

Oil prices rose on Monday as the slow return of U.S. crude output cut by frigid conditions served as a reminder of the tight supply situation, just as demand recovers from the depths of the COVID-19 pandemic.

Brent crude was up $1.38, or 2.2%, at $64.29 per barrel. West Texas Intermediate gained $1.38, or 2.33%, to trade at $60.62 per barrel.

Abnormally cold weather in Texas and the Plains states forced the shutdown of up to 4 million barrels per day (bpd) of crude production along with 21 billion cubic feet of natural gas output, analysts estimated.

Shale oil producers in the region could take at least two weeks to restart the more than 2 million barrels per day (bpd) of crude output affected, sources said, as frozen pipes and power supply interruptions slow their recovery.

“With three-quarters of fracking crews standing down, the likelihood of a fast resumption is low,” ANZ Research said in a note.

For the first time since November, U.S. drilling companies cut the number of oil rigs operating due to the cold and snow enveloping Texas, New Mexico and other energy-producing centres.

OPEC+ oil producers are set to meet on March 4, with sources saying the group is likely to ease curbs on supply after April given a recovery in prices, although any increase in output will likely be modest given lingering uncertainty over the pandemic.

“Saudi Arabia is eager to pursue yet higher prices in order to cover its social break-even expenses at around $80 a barrel while Russia is strongly focused on unwinding current cuts and getting back to normal production,” said SEB chief commodity analyst Bjarne Schieldrop.

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Crude Oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

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oil

Crude Oil Rose Above $65 Per Barrel as US Production Drop Due to Texas Weather

Oil prices rose to $65.47 per barrel on Thursday as crude oil production dropped in the US due to frigid Texas weather.

The unusual weather has left millions in the dark and forced oil producers to shut down production. According to reports, at least the winter blast has claimed 24 lives.

Brent crude oil gained $2 to $65.47 on Thursday morning before pulling back to $64.62 per barrel around 11:00 am Nigerian time.

U.S. West Texas Intermediate (WTI) crude rose 2.3 percent to settle at $61.74 per barrel.

“This has just sent us to the next level,” said Bob Yawger, director of energy futures at Mizuho in New York. “Crude oil WTI will probably max out somewhere pretty close to $65.65, refinery utilization rate will probably slide to somewhere around 76%,” Yawger said.

However, the report that Saudi Arabia plans to increase production in the coming months weighed on crude oil as it can be seen in the chart below.

Prince Abdulaziz bin Salman, Saudi Arabian Energy Minister, warned that it was too early to declare victory against the COVID-19 virus and that oil producers must remain “extremely cautious”.

“We are in a much better place than we were a year ago, but I must warn, once again, against complacency. The uncertainty is very high, and we have to be extremely cautious,” he told an energy industry event.

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