European Stocks Steady as Energy, Financials Counter China Woes

(Bloomberg) -- European stocks pared their losses to trade flat as gains in the energy sector and strength in financial services countered the impact of disappointing China economic data earlier in the day. 

The Stoxx Europe 600 was steady by 2:43 p.m. in London, with energy the best performing sector after Saudi Arabia and Russia extended their unilateral oil production cut by another three months. Financial services also performed well with Partners Group Holding AG rallying after its revenue for the first half of the year beat estimates. Shell PLC made the biggest individual contributions to the regional benchmark. The index had dropped as much as 0.8% earlier.

The high oil price is a boon for the energy sector, said James Athey, investment director at Abrdn, adding, however, that more broadly energy price gains pose “a most unwelcome complication. It has the potential to increase central bank hawkishness and reduce demand all at the same time.”

In other individual moves, Sectra AB fell the most since June after the Swedish medical imaging and cybersecurity firm reported a profit drop. Orsted AS also dropped after Moody's cut its outlook on the Danish wind turbine maker while Bernstein slashed in price target.

The weak performance of China-exposed companies follows a dismal August, when worries about the Asian nation's growth were accompanied by concerns that interest rates will peak at higher-than-expected levels. Investors are also fretting about slowing growth in the region at the same time as inflation remains above the European Central Bank's target.

ECB President Christine Lagarde, meanwhile, avoided giving an indication on whether the European Central Bank will raise or hold interest rates next week as she delivered a speech in London on Monday.  

“In Europe, I don't really see how the market could rise in the next two months given the lack of drivers and worsening indicators,” said Thomas Zlowodzki, a strategist at Oddo in Paris.

SECTORS TO WATCH

• European mining stocks may be in focus as iron ore rose to the highest since April, with investors welcoming China's efforts to aid the steel-intensive property sector and developer Country Garden narrowly avoiding a default.

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--With assistance from Julien Ponthus.

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