European shares bounce after volatile week

Oil stocks fuelled a rebound in European equities on Monday from sharp losses late last week when uncertainty over the Omicron variant and the direction of U.S. monetary policy had weighed on investor sentiment.

The pan-European STOXX 600 rose 0.6% after ending last week with slight losses.

The oil & gas sector climbed 1.7%, lifted by a more than $1 a barrel gain in crude prices after top exporter Saudi Arabia raised prices. [O/R]

Some concerns about the worrying Omicron variant were eased following comments from health officials. A South African health official said the strain caused mild infections, while top U.S. infectious disease official Anthony Fauci told CNN, “it does not look like there’s a great degree of severity” so far.

“The positive news coming out of Africa is good for risk appetite, as markets are now starting to think Omicron may be less severe as previously thought, and that European authority measures are as far as they’ll go,” said Stuart Cole, head macro economist at Equiti Capital.

“Last week’s losses are likely to be taken back this week if people see that Omicron isn’t as deadly as previous mutations, and as the European Central Bank remains wedded to their transitory inflation line.”

Investors are watching out for clues on the severity of the new variant and key U.S. inflation figures later this week that could settle the path for an interest rate hike by the Federal Reserve.

Meanwhile, a survey showed investor morale in the euro zone deteriorated in December to reach its lowest level since April as renewed curbs to contain a fourth wave clouded growth expectations, highlighting the fragile sentiment.

Italy’s benchmark FTSE MIB gained 1.0% after Fitch upgraded the country’s rating to “BBB” from “BBB-” as it expects the economy to expand after reopening from pandemic lockdowns.

The Euro STOXX 50 volatility index slipped to 31.21 after spiking to 33.08 last week.

Among individual stocks, shares of French medical device firm Carmat plunged 15.7% after it temporarily suspended implants of its Aeson artificial hearts.

Just Eat Takeaway.com slipped 5.2% to the bottom of the STOXX 600 after Bernstein downgraded the stock to “market perform”. Other food delivery firms Delivery Hero and Deliveroo plunged ahead of an EU Commission ruling on gig workers later this week.

European banks UniCredit and Deutsche Bank (DE:DBKGn) added 3.2% and 1.9%, respectively, following J.P.Morgan upgrades.

French construction materials company Saint-Gobain rose 0.9% on plans to acquire all shares in U.S.-based GCP Applied Technologies in a deal valued at around $2.3 billion.

European shares bounce after volatile week