By Barbara Kollmeyer, MarketWatch

German stock outshine peers; major oil companies rise

European stocks eked out slight gains on Monday, as investors weighed geopolitical tensions and looked ahead to U.S. earnings season, in the hopes that strong corporate results might provide the next positive leg for eurozone stocks.

What are markets doing?

The Stoxx Europe 600 rose 0.1% to finish at 359.31, after closing down by 0.1% on Friday and shedding 4.6% for the week (http://www.marketwatch.com/story/european-stocks-see-bounce-but-on-track-for-big-weekly-declines-2018-10-12). Europe stocks also logged the biggest weekly decline in months last week, after a two-day meltdown for U.S. stocks.

A bright spot in Europe, Germany's DAX 30 rose 0.8% to 11,614.16, while France's CAC 40 inched lower to end down less than 0.1% at 5,095.07. The U.K.'s FTSE 100 wrapped up 0.5% to 7,029.22.

Greece's ASX Composite jumped by 1% to 634.47, while Italy's FTSE MIB Italy index was up 0.2% to close at 19,287.64.

The euro was flat at $1.1594 from $1.1560 late Friday. The pound was last buying $1.3171, up from $1.3142 late Friday in New York.

What is driving the market?

European stocks followed the lead of Wall Street last week, which struggled through a two-day selloff linked to fears of rising interest rates. Specific focus is on 10-year U.S. Treasury bond yields, which hit a seven-year high above 3.25% last week. That yield was hovering at 3.15% on Monday.

U.S. stocks were poised for a choppy session (http://www.marketwatch.com/story/pressure-set-to-resume-for-wall-street-as-stock-futures-pitch-lower-2018-10-15), while Asia closed in the red (http://www.marketwatch.com/story/asian-markets-resume-their-fall-with-tech-stocks-leading-the-way-2018-10-14).

European politics were also a focus after allies of German Chancellor Angela Merkel suffered a setback in Bavaria, with the worst election showing since 1950 (http://www.marketwatch.com/story/merkels-allies-fare-poorly-in-bavaria-regional-election-2018-10-14). As for Brexit the U.K. and the European Union (http://www.marketwatch.com/story/brexit-talks-face-setback-just-days-ahead-of-key-summit-2018-10-14), failed to find a compromise for the Irish border over the weekend. The next EU summit, which will have Brexit at its center once again, is due to kick off on Wednesday.

U.K. Prime Minister Theresa May called for "cool, calm heads" as she described Britain's chances of striking a trade pact as it exist from the EU as "still achievable," in a speech in front of parliament later Monday.

Meanwhile, Italy was slated to submit its contentious budget proposal, which will see the country lock horns with the EU by running a higher budget deficit that the European commission believes is fiscally responsible.

Geopolitics are also in focus, with major oil companies, in particular, watching a feud between the U.S. and Saudi Arabia over a missing dissident journalist.

President Donald Trump (http://www.marketwatch.com/story/from-climate-change-to-china-to-kavanaugh-heres-what-trump-told-60-minutes-2018-10-14) threatened "severe punishment" for Saudi Arabia, should the country be found in any way to be involved in the disappearance, which triggered the Saudis to vowed to retaliate against any such move. Trump also said in the interview with 60 Minutes that China could face a third round tariffs, but that they couldn't fight back against it.

What are strategists saying?

"The EU/Rome clash has already destabilized Italy's bond markets, however the contagion to Europe's other financially-challenged states has been weak. While Portugal and Spain have seen their yield spreads with Germany rise this month, it is worth noting that Portugal's debt was upgraded to investment grade this morning by Moody's, suggesting that this is a localized problem for Italy," said Kathleen Brooks, research director at Capital Index.

Stock movers

Among the heavyweights, auto makers were on the rise, with Volkswagen AG (VOW.XE) up 3% and BMW AG (BMW.XE) (BMW.XE) up 1%.

Pharmaceutical group Bayer AG (BAYN.XE) climbed 2.6%.

Major oil companies such as Total SA saw some benefits from rising crude-oil prices on the back of the U.S.-Saudi diplomatic rift. Shares of Total SA rose 1.2%, while BP PLC (BP.LN) (BP.LN) added 0.3% and Lundin Petroleum AB (LUPE.SK) added 0.5%.

 

(END) Dow Jones Newswires

October 15, 2018 12:21 ET (16:21 GMT)

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