Europe close: Oil stocks lead markets lower as crude prices slide

(Sharecast News) - European stocks pared losses by the close but finished firmly lower, with heavy falls in Frankfurt, Milan and Madrid weighing heavily on the Stoxx 600 index. The pan-European benchmark index close down 0.54% at 517.05, with losses of 1% or more registered on the Dax, FTSE MIB and Ibex 35, with the oil and gas sector dragging indices lower across the continent as crude prices fell.

Brent was down 1.6% at $77.14 a barrel as prices crashed to their lowest since early January after Opec+ nations revealed they would gradually phase out production cuts after September.

Weighing on market sentiment in Europe was stronger-than-expected rise in Germany unemployment in May. Data from the Federal Labour Office showed that the number of jobless claims rose by 25,000 in seasonally adjusted terms, ahead of estimates for a rise of 10,000.

Germany saw 702,000 job openings in May, down from 767,000 at the same time a year ago, while the seasonally adjusted jobless rate was flat at 5.9%. "The spring recovery did not really get going this year," said labour office head Andrea Nahles. "Improvement is still a long time coming."

Axel Rudolph, senior market analyst at IG, said that disappointing labour-market figures from the US also "led to more risk off sentiment with most [European] equity indices ending the day in the red".

US companies advertised fewer positions still in April, a possible reflection of the ongoing cooldown in the demand for labour. According to the Department of Labor, in seasonally adjusted terms the number of job openings declined by 3.5% month-on-month to reach a three-year low 8.06m, well below the 8.34m consensus estimate.

However, Rudolph said that a softening of the labour market "could help the Federal Reserve's fight against inflation and lead to a September rate cut", with the market probability of such a rate cut rising from 60% to 65% over the course of the day.

Oil stocks sink

The Stoxx Europe 600 Oil & Gas Index was down 2.6% by the close of play, tracking crude prices lower, with BP, Shell, TotalEnergies, Equinor and Aker BP all registering steep losses.

Ocado was the heaviest faller on the Stoxx 600, with the UK grocery delivery firm falling more than 7% on the day the quarterly reshuffle of the FTSE UK Index Series is recalculated. The stock is set to be kicked out of the FTSE 100, having dropped more than 52% since the start of 2024.

Standard Chartered was under the cosh after a whistleblower accused the bank of carrying out more than $100bn of undetected transactions that breached sanctions against Iran. The alleged transactions were made between 2008 and 2013, after StanChart said it had discontinued all Iranian operations in 2007, to a number of front companies for Hamas and Hezbollah, as well as other entities linked to terrorist organisations.

Danish shipping giant Maersk was also in the red even after raising its full-year profits targets for the second time in five weeks as container freight costs continue to rise as a result of the ongoing crisis in the Red Sea. Underlying EBIT is now expected to be $1bn to $3bn, compared with previous guidance of $0bn to -$2.0bn.