Sun, Oct 01, 2017 - Page 14 News List

European shares have best month this year, despite Catalonia woes in Spain

Reuters, LONDON and MILAN, Italy

European shares on Friday ended with the best monthly gain this year, helped by a weakening euro, but uncertainty over the Catalan crisis weighed on Spanish stocks.

A weakening euro has taken pressure off Europe’s equities, especially the exporter-heavy DAX, helping investors find renewed enthusiasm for the asset class after the slow summer months.

The pan-European STOXX 600 on Friday ended at a three-month high, rising 0.5 percent to close at 388.16, a weekly increase of 1.3 percent from 383.22 on Sept. 22 and a quarterly gain after falling in the second quarter.

“Europe is ticking more and more boxes,” Coutts & Co director of global markets Monique Wong said. “It’s slightly slowed down with the appreciation of the currency, but the euro is still a long way below previous highs.”

Deutsche Bank AG analysts forecast earnings for the STOXX to grow 11 percent this year, with the pickup in global growth and rebound in commodities more than offsetting the negative effect of the stronger euro.

On Friday, Volkswagen AG was in the spotlight after the latest twist in the automaker’s long-running diesel cheating scandal, when it said it was increasing provisions for settlements in North America.

Its shares fell as much as 4 percent before paring most losses and end down just 0.3 percent.

Porsche AG, Volkswagen’s controlling shareholder, also recovered, ending up 0.2 percent.

Investors have been weighing the pros and cons of investing in the auto sector, which is being hit as consumers begin to shun diesel and investments into electric vehicles gather pace.

However, depressed valuations are tempting to some, including Goldman Sachs Group Inc, which upgraded autos to overweight early last month.

“It’s a very unloved sector, at a 60 percent discount on price to earnings to the rest of Europe,” Goldman Sachs head of European equity strategy Sharon Bell said. “The sector has been hit by the strength of the euro as well, given its export focus.”

Spain’s IBEX on Friday rose 0.5 percent to end at 10,381.50, an increase of 0.7 percent from a close of 10,305 on Sept. 22, as some brokers said worries over Catalonia were overdone, although uncertainty remained.

Catalonia’s leader made clear his government was determined to go ahead with a vote on independence today, but Madrid insisted the referendum it has declared is illegal.

“The Catalan story confounds and worries us,” Swissquote Group Holding Ltd analyst Yann Quellen said in a note. “All things are possible: a win for ‘Catalexit’ or even a shutdown of voting by angry officials in Madrid... Ole! Markets are not pricing in any risk for Sunday.”

The Spanish blue chip index has gained 0.8 percent this month, underperforming the STOXX’s 3.8 percent gain.

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