European shares retreat as oil price rally fizzles out

European stock markets fell on Monday, with shares in major oil and gas companies losing ground as an oil price rally fizzled out.

The pan-European FTSEurofirst 300 index, which rose 3 per cent on Friday to mark its first weekly gain for 2016, fell 0.7 per cent. The FTSEurofirst is down 8 per cent since the start of 2016.

The euro zone’s blue-chip Euro STOXX 50 index and Germany’s DAX also both fell by 0.5 per cent, with the DAX some 20 per cent below a record high reached last April.

In Dublin, the Iseq index of leading shares was marginally higher, up 15.9 points to 6,340.22.

Oil prices lost ground, after having rallied 10 per cent on Friday. This in turn pushed down the shares of companies such as BP, Royal Dutch Shell and Total.

World stock markets have fallen since the start of 2016, partly due to signs of a slowdown in China, the world’s second-biggest economy and a major consumer of oil and metals.

The Chinese situation has impacted oil prices, along with concerns about oversupply in the oil market.

Several investors and analysts said the situation remained volatile, with JP Morgan's global equity strategist Mislav Matejka reiterating his recommendation to sell out on any stock market rebound, such as the one on Friday.

“We reiterate our stance since November that the key strategy for the foreseeable future is to sell these rallies,” he said.

Pierre de Saab, fund manager at Dominice & Co, also warned that stock markets could fall further this year, given the signs of weakness in the global economy.

However, Greek shares managed to outperform.

Athens’ benchmark ATG equity index, which fell around 30 per cent in 2015 due to persistent concerns over Greece’s debt problems, rose 1.2 per cent after rating agency Standard & Poor’s upgraded its rating on Greece late on Friday.

Jyske Bank also rose 5.8 per cent after the Danish bank forecast making an annual profit.

Elsewhere, Chinese shares began the week on a firmer note on Monday, extending gains from Friday after a rally in battered oil prices sparked a rise in global equities.

The benchmark Shanghai Composite Index closed up 0.8 per cent, while the CSI300 index of the largest listed companies in Shanghai and Shenzhen added 0.5 per cent, building on gains of more than 1 percent on Friday as oil bounced off 12-year lows.

Reuters