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Aug 8, 2016

European Markets Closing Report on August 8, 2016: Sharp Uptick in Oil Fails to Give Major Boost to Europe's Stocks, by Arjun Kharpal and Alexandra Gibbs

Arjun Kharpal, Alexandra Gibbs

European equities closed flat to slightly higher on Monday, 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 provisionally closed just above the flat line at 0.04 percent, with sectors pointing in different directions.

Despite the weak performance, all major European bourses closed higher, with the U.K.'s FTSE 100 and France's CAC 40 closing up 0.23 and 0.11 percent respectively, while Germany's DAX popped 0.63 percent.
FTSE FTSE 6809.13 15.66 0.23% 722652324
DAX DAX 10432.36 65.15 0.63% 66865105
CAC CAC 4415.46 4.91 0.11% 72172151
IBEX 35 IBEX 35 Idx 8562.50 23.10 0.27% 171197078
European markets started off the day on a positive note, despite China's July exports falling 4.4 percent year-on year-on and imports declining 12.5 percent. Asian markets finished broadly higher on Monday, despite the data.
Another factor influencing markets on Monday was the sharp rebound in oil prices. Crude prices extended gains during trade, amid renewed speculation that OPEC would try to restrain output, easing concerns over a supply glut that has dominated market sentiment as of late; Reuters reported.
Brent and U.S. crude futures were trading sharply higher during trade, hovering at $45.24 and $42.90 at Europe's market close. Oil prices and upcoming retail sales data kept U.S. investors on their toes, however stocks in the U.S. trading mostly lower at Europe's close.
Basic resources was Europe's best performing sector on Monday, despite weak Chinese trade data; finishing trade up 1.68 percent. 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 to close sharply higher.
Steel exports in July however fell but exports still remain high, which supported Arcelormittal's share price on Monday, closing up 1.8 percent.
Investors were also recovering from 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 Monday note.

Banks pop 1.4%

The banking sector helped pull European stocks up during trade. Barclays shares rallied 3.55 percent after Exane BNP Paribas raised its price target for the stock along with HSBC and Standard Chartered, which both finished 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 closed up 3 percent 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 also closed sharply 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 earlier gains and sank to the bottom of Europe's benchmarks, off 4.67 percent by the close.
Aside from BMPS, several Italian banks finished sharply higher, with Banco Popolare, Banca Popolare di Milano and UniCredit all closing above 2.5 percent.

Other stocks to watch

Among the other big movers of the day was Dutch mail and parcel delivery firm Postnl which rallied to close over 8 percent up after it confirmed its outlook for 2016 and said it expects to resume its dividend payments in 2017.
German retailer Hugo Boss sank over 4 percent after Societe Generale and Bryan Garnier cut their price targets 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 to close over 3.5 percent down.