European shares edged higher on Monday with investors bracing for earnings reports from several big banks later in the week, while Portuguese oil firm Galp soared to a 16-year high following a positive update to its gas exploration in Namibia.
The pan-continent STOXX 600 was up 0.2% by 0828 GMT, supported by a 0.3% gain in banking stocks.
Earnings reports from European lenders will be in the spotlight this week as investors are likely to get a clearer picture of whether higher interest rates are still boosting profits or if a year-long share price rally will run out of steam.
BNP Paribas, Deutsche Bank, Barclays and Lloyds will report earnings later in the week.
“We’re seeing stabilisation and growth. While lending might sequentially pick up and non-performing loans might continue to be relatively low, net interest margins are coming down,” said Maximilian Kunkel, chief investment officer, Global Family & Institutional Wealth at UBS.
European shares pare losses as geopolitical jitters ease
“On the other side, we’re also seeing that capital markets are opening up again and there is an increase in (mergers and acquisitions) activity.”
Overall, quarterly earnings are expected to decline 12.1% from a year-ago period, according to LSEG data on Tuesday.
Galp Energia said its Mopane field off the coast of Namibia could have at least 10 billion barrels of oil, sending shares of the company 17.1% higher and to the top of the benchmark index.
The STOXX 600 posted its third straight weekly decline on Friday as a spike in Middle East tensions sparked concerns of a widening conflict and the possibility of high commodity prices feeding into inflation pressures.
Shares of Alstom gained 1.5% after the French train manufacturer agreed to sell its North American conventional rail signalling business to German rail systems manufacturer Knorr-Bremse AG for around 630 million euros ($671 million).
Embracer said it plans to split into three separate listed companies, and that it has secured new financing that it will use to cut debt, sending shares of the Swedish gaming group higher by 10.3%.
Iveco dropped 4.1%, bottoming Italy’s benchmark index after the automotive manufacturer said Chief Executive Officer Gerrit Marx is leaving to head Italian-American company CNH Industrial.
Greece’s ATHEX index gained 1.1% after credit ratings agency S&P revised the country’s outlook to “positive”from “stable”.
On the data front, Germany’s industry lobby BDI flagged that industrial production is likely to decline again this year and exports will stagnate, painting an uncertain picture for Europe’s manufacturing powerhouse.
Investors await euro zone’s April consumer confidence data and comments by ECB President Christine Lagarde due later in the day.
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