European Stocks Rise as Geopolitical Worries Ebb; Energy Drops

(Bloomberg) -- European stocks gained as easing geopolitical concerns in the Middle East lifted sentiment.

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The Stoxx Europe 600 Index rose 0.4% at the close in London as the construction and media sectors rallied while energy stocks were pulled lower by falling oil prices. Cheaper crude boosted airline shares.

Crude tumbled more than 6% and gold edged lower after Iran said its oil industry was operating normally following Israel’s attacks on military targets across the country in retaliation for a missile barrage earlier this month.

“The limited response from Israel has raised hopes that the conflict will not escalate further,” said Mohit Kumar, chief strategist and economist for Europe at Jefferies.

Equities in Europe are set for a small retreat in October as risks including the UK budget and the US presidential election keep traders cautious. Sectors most exposed to China’s economy, such as luxury stocks and miners, have come under particular pressure as investors assess the country’s push to revive stalling growth.

There are positive factors for investors consider too. Earnings beats have come in above average in both the US and Europe so far, according to Barclays strategists.

“We still have a medium term bullish bias for risky assets, but are taking some profits leading up to the elections,” Kumar at Jefferies said. Any pullback in riskier assets was a buying opportunity, he said.

Markets are also readying for a barrage of data this week including Chinese economic activity readings, eurozone and US growth prints as well as an American payrolls report.

Among single stocks on Monday, Royal Philips NV fell the most in 26 years after the medical technology firm slashed its annual sales-growth forecast on tepid demand in China. Computacenter Plc dipped as the company warned it saw a softer end to the third quarter than hoped and that annual adjusted pretax profits will be modestly lower than the year before.

Sonova Holding AG was among the best-performing stocks in terms of points on the wider benchmark as Costco Wholesale Corp. said it’s bringing specific hearing aids from the company back into its product range. And Melrose Industries Plc rose after the aerospace engineer released a document explaining accounting around Risk and Revenue Sharing Partnerships, which increased market confidence.

For more on equity markets:

  • Equities Relying on Growth Are Tipped for Rebound: Taking Stock

  • M&A Watch Europe: Grifols, EQT, BT, Anglo American, JCDecaux

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