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Oil slip fails to dampen Europe as PMI boosts stocks; Yellen eyed
European stocks extended gains on Tuesday, buoyed by data which showed that the euro zone economy had yet to feel a negative impact from the Brexit vote.
The pan-European STOXX 600 (^STOXX) was up 0.8 percent in afternoon trade, with all sectors trading in the black. All major bourses were higher.
The euro zone economy accelerated marginally in August , according to Markit's euro zone composite purchasing managers' index (PMI), which came in at a seven-month high. The flash reading came in at 53.3, up from 53.2 in July.
Aside from data, markets are in wait-and-see mode ahead of a speech on Friday by U.S. Federal Reserve chair Janet Yellen at Jackson Hole and clues about the timing of the next U.S interest rate hike.
Fed Chair Janet Yellen will give a speech at the Federal Reserve Bank of Kansas City's annual Economic Policy Symposium at Jackson Hole, Wyoming on Friday. Traders are hoping this will give clues on the timing of a U.S. rate hike.
Several Fed officials have commented on the timing of a rate hike, while Fed Vice-Chairman Stanley Fischer said on Sunday that the U.S. central bank was close to hitting its targets for full employment and 2 percent inflation. Still, analysts don't expect an interest rate hike next month.
"The fact it is currently fairly obvious that Fed officials remain divided about the timing of when rates are likely to rise ... means any decision in September still remains highly unlikely," Michael Hewson, chief market analyst at CMC Markets, said in a note.
The oil price slide didn't hamper European equities during trade. Both Brent (London Stock Exchange: GLEN-GB) and U.S. crude (London Stock Exchange: GLEN-GB) posted solid losses with prices under pressure after Goldman Sachs said in a note early Tuesday morning that "the oil price and fundamental recovery remains fragile", reiterating its $45 - $50 per barrel Brent crude forecast through next summer.
Markets were also hoping that an informal meeting of OPEC members on the sidelines of an energy conference in Algeria next month could see production freezes or cuts. But the fall in oil prices suggest optimism around such an action has faded. Despite the decline, the energy sector was trading broadly higher.
Meanwhile, basic resources stocks got a boost after Jefferies said in a note that there are fundamental improvements in the mining sector with demand stabilizing and supply declining in several metals. The broker raised its price target for BHP Billiton (London Stock Exchange: BLT-GB) and Glencore (London Stock Exchange: GLEN-GB) sending shares in both stocks above 2 percent each.
U.K. homebuilder Persimmon (London Stock Exchange: PSN-GB) outperformed most stocks on Tuesday, last standing 3.5 percent up, after it said first-half profit rose 29 percent, helping push other names in the sector such as Taylor Wimpey (London Stock Exchange: TW.-GB), Bellway and Bovis Homes Group (London Stock Exchange: BVS-GB) higher.
Reuters reported that the chief executive of Polish insurer PZU (:PZU-PL) is flying to Milan for talks to acquire Bank Pekao from Unicredit (Milan Stock Exchange: UCG'S-IT). Shares of the Italian bank rallied over 6 percent. The news boosted several Italian banks, including Intesa Sanpaolo (Milan Stock Exchange: ISP'S-IT) and Banco Popolare (Milan Stock Exchange: BP-IT).
Meanwhile, Renault (Euronext Paris: RNO-FR) was near the bottom of the STOXX 600 after the Financial Times reported that the French government's report on the carmaker's emission probe left out crucial details.
Meanwhile, Volkswagen (XETRA:VOW3-DE) shares shot up over 2 percent after it said the two auto parts suppliers, with which it had been locked in a contract dispute, had agreed to start delivering parts again and that production would resume , according to Reuters.
Elsewhere, Swiss watch exports fell 20.5 percent in July year-on-year, sending shares of jewelry firms Swatch (Swiss Exchange: UHR-CH) into negative territory.
