Europe close: Stocks inch higher as oil prices slump, but uncertainty remains

(Sharecast News) - European stocks mostly advanced on Wednesday as oil prices dropped, though gains were trimmed by the close of play following a cautious start on Wall Street, as investors continued to watch developments in the Middle East.

Brent crude was down 3.4% at $93.38 a barrel by the close, marking its third straight session below the $100 level. Brent briefly touched the $91.75 mark - its lowest in five weeks - before trimming earlier losses.

The leg down came despite a rise in tensions between Washington and Tehran, with recent exchanges of fire threatening to dismantle a ceasefire that began at the start of April.

"Crude prices fell to a five-week low as hopes of easing Middle East tensions improved sentiment. Reports that a potential US-Iran agreement could reopen Strait of Hormuz shipping eased fears of major energy disruption, offering relief to markets and central banks, though investors remain cautious pending concrete details," said Axel Rudolph, chief technical analyst at IG.

Stocks in London, Paris, Zurich and Madrid finished higher, while Frankfurt shares flatlined and Milan's main index dropped into the red. The result was a 0.03% gain for the benchmark Stoxx Europe 600 to 628.18, pulling back from an earlier high of 631.75 (+0.6%).

US markets were mixed early on with the S&P 500 and Nasdaq pulling back after hitting record highs on Tuesday, while the Dow edged higher.

Investors were also likely digesting comments from the European Central Bank, which warned in its biannual report on Wednesday that current market prices were underestimating current geopolitical and fiscal risks.

"Despite initial declines, financial asset prices still look stretched by historical standards, all the more so when current geoeconomic stress and uncertainty are taken into account," said ECB vice president Luis de Guindos. "This leaves markets vulnerable to sharp repricing."

AkzoNobel jumps

Dutch paint maker AkzoNobel saw shares surge 16% after its board rejected a €12.5bn takeover approach from Nippon Paint Holdings and Sherwin-Williams, continuing to recommend a proposed deal with Axalta Coating Systems. The latest offer price of €73 a share represented a 39% premium to Tuesday's closing price.

Amsterdam-listed CVC Capital Partners rose after offloading its stake in Spanish energy firm Naturgy Energy Group for €3.1bn. Naturgy shares dropped after the news, which followed BlackRock's exit from the company in a €3.3bn share sale in March.

Travel and leisure stocks were performing well as falling oil prices eased inflationary pressures, with IAG, easyJet, InterContinental Hotels, Deutsche Lufthansa and Air France-KLM all putting in decent gains.

Milan's FTSE MIB was being weighed down by heavy falls in the energy sector, including Saipem, ENI and Enel, and chip group STMicroelectronics which pulled back after recent gains.