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* Commodity shares surge; Mining index up 3%
* Rate talks lift banks
* ASOS slumps on profit warning
(New throughout, updates prices, market activity and comments
to close)
By Sruthi Shankar and Susan Mathew
Oct 11 (Reuters) - A strong rally in mining stocks on Monday
boosted an index of European equities, which retraced all losses
logged early in the session on worries about inflation and the
upcoming earnings season.
Europe's mining sector surged 3% to post its biggest
daily gain in three months as iron ore and coking coal rallied
on supply fears, while base metals prices jumped on concerns
about rising cost of energy and raw materials.
As a global energy crunch lifted crude prices, oil stocks
rose more than 1%, as did auto shares,
offsetting losses in travel & leisure, utility
and retail names.
The pan-European STOXX 600 index recouped losses of
as much as 0.6% on the day, to end marginally higher. A heavy
presence of commodity-related companies saw London's FTSE 100
outperform with a 0.7% rise.
"Inflation is set to stay higher for longer than we
previously envisaged due to surging energy prices and goods
shortages. The boost from energy will go into reverse next year
due to base effects and lower oil and gas prices," said the
global economics team at Capital Economics.
"Goods shortages are worsening and will persist for some
time... These pressures should start to ease next year. But
there is a risk that the shortages trigger a more persistent
pick-up in price pressures."
With third-quarter earnings set to kick off this week,
investors worry about rising energy costs eating into company
earnings. Profit growth is estimated to be up 29.6% for U.S.
companies and 45.6% for European firms, according to Refinitiv
IBES data.
The banking index touched its highest since February
2020, recovering almost all pandemic-induced losses as investors
jacked up interest rate expectations. Money markets are pricing
in a 10 basis-point rate hike from the European Central Bank by
the end of next year.
British banks HSBC, Lloyds Banking Group
and Natwest Group all rose more than 2% after hawkish
comments from Bank of England officials drove more bets on a
November interest rate increase.
Among stocks, British online fashion retailer ASOS
tumbled 13.4% after it warned higher logistics costs and supply
chain disruption could force 2022 profits down more than 40%,
and said Chief Executive Nick Beighton will step down.
German real estate investor Adler Group slipped
2.5% after it agreed to sell residential and commercial property
worth 1.49 billion euros ($1.73 billion) to rival LEG Immobilien
.
(Reporting by Sruthi Shankar and Anisha Sircar in Bengaluru;
Editing by Sriraj Kalluvila and David Gregorio)
