European shares higher as oil drops
The pan-European STOXX 600 index closed up 0.5% at 652.09 points
European shares started the month higher on Monday as oil prices dropped sharply on hopes for renewed diplomatic efforts to end the Iran war, while AstraZeneca sank on reports of merger talks with U.S. rival Bristol Myers Squibb.
The pan-European STOXX 600 index closed up 0.5% at 652.09 points and hovered near a record high it clinched on Friday. Most major regional bourses closed higher but London’s FTSE was the only outlier and inched down 0.1%.
Stocks rock from positive to negative on a near daily basis because again we’ve got oil prices back down again because President Trump has signalled a more diplomatic tone. But you just don’t know what the next week will bring, Lauren Hyslop, investment manager at Mattioli Woods, said.
Oil futures slipped more than 4.5%. Trump’s decision to hold off on an attack on Iran, while seeking an agreement to reopen the Strait of Hormuz, eased fears of further supply disruptions.
However, Iran said there were no talks under way with Washington and no plans for any meetings.
The decline in crude prices boosted oil-sensitive sectors with travel and leisure adding 0.6%. Aerospace and defence stocks were the strongest sectoral performers, gaining 2.7%.
M&A activity also commanded investors’ attention, as markets assessed latest batch of deal announcements and reports of potential tie-ups.
AstraZeneca shares tumbled 9%, at the bottom of the STOXX 600 index, after reports of a possible $400 billion merger of the European pharmaceutical giant with U.S.-based Bristol Myers Squibb. The broader healthcare sector shed 1.7%.
It’s not a great thing for the UK market because AstraZeneca is one of our biggest companies, if that gets taken out and it’s taken on by a U.S. company, that’s another major UK company that’s gone from the market, Hyslop said.
The STOXX 600 rose more than 1% in July, with resilient earnings helping investors look past the economic fallout from the Iran-U.S. war. The turmoil had pushed Brent crude above $90 a barrel, a particular concern for Europe given the region’s dependence on imported energy.