European equities traded slightly higher during Monday’s afternoon trade, as investors remained cautious despite a solid tick-up in oil prices and a strong performance seen by Europe’s banks and miners.
The pan-European STOXX 600 fluctuated around the flat line, with sectors pointing in different directions.
Asian markets finished broadly higher on Monday, despite China’s July exports falling 4.4 percent year-on year-on and imports declining 12.5 percent.
Despite the weak data, investors were also taking into account last Friday’s strong U.S. jobs report, which showed that the country had added 255,000 jobs, beating expectations and raising the chances that the Fed could raise interest rates this year.
“Certainly the odds have gone up that we could get a move, which suggests that this month’s Jackson Hole Symposium on August 26 is likely to be a key bellwether for the Fed’s appetite for a move higher, or whether the lack of inflation could stay their hand,” Michael Hewson, chief market analyst at CMC Markets, wrote in a note on Monday.
Another factor influencing markets on Monday was the rebound in oil prices. Crude extended price gains during trade, following a report by the Wall Street Journal report published late last week, which suggested renewed calls by some OPEC members to freeze production levels, in a bid to rein in output.
Brent and U.S. crude were trading sharply higher during trade, hovering around $45 and $42.605 around the U.S. open. Oil prices and last week’s U.S. jobs report kept investors overseas on their toes, with U.S. markets trading slightly higher at its open on Monday.
Basic resources was one of Europe’s best performing sectors on Monday, despite weak Chinese trade data. Drilling into the numbers however showed Chinese iron ore imports rose 8.3 percent month-on-month in July to hit its second-highest on record. This helped iron ore mining giants Rio Tinto and BHP Billiton trade higher.
Steel exports in July however fell but exports still remain high, which supported Arcelormittal’s share price on Monday. But precious metal miner Randgold Resources saw its shares under pressure as the gold price came off slightly.
The banking sector helped pull European stocks higher. Barclays shares rallied over 3 percent after Exane BNP Paribas sharply raised its price target for the stock along with HSBC which was also in the black.
Italy’s lenders were once again in focus as the country figures out how to deal with the large portfolio of bad loans held by the banks. Mediobanca shares were sharply higher after Kepler Cheuvreux raised its price target for the stock. Vincent Bollore is looking to raise his stake in Mediobanca to 22-23 percent to indirectly control insurer Generali, according to La Stampa. Generali shares were also higher.
Meanwhile, chief executive of Banca Monte dei Paschi di Siena Fabrizio Viola said in an interview to Il Messaggero on Sunday that the rescue plan for the bank is the “right solution”. The plan involves selling its bad loans to a special-purpose vehicle which is backed by private investors as well as the state-backed Atlante fund. Shares in BMPS reversed gains to trade slightly lower.
Aside from BMPS, the majority of Italian banks were sharply higher, with Banco Popolare, Banca Popolare di Milano and UniCredit all trading 2.5 percent or higher.
Other stocks to watch
Among the other big movers of the day were Dutch mail and parcel delivery firm Postnl which rallied close to 9 percent after it confirmed its outlook for 2016 and said it expects to resume its dividend payments in 2017.
German retailer Hugo Boss was sitting at the bottom of the STOXX 600, down over 5.5 percent, after SocGen cut its price target for the stock.
Meanwhile, Credit Suisse and a handful of other brokers cut their price target for drugs giant Novo Nordisk, sending shares in the firm over 3 percent down.