Europe close: Stocks off highs amid conflicting headlines on US stimulus, Brexit

(Sharecast News) - European stocks were mostly higher on the first day of the new quarter despite conflicting headlines around talks on Capitol Hill on approving a new stimulus package in the US and around Brexit.
Contrary to early reports, later in the day reports surfaced that new demands from Democrats to extend benefits to illegal immigrants might prove a bridge too far for Republicans.

"While time is dwindling for US politicians to reach an agreement ahead of the election, there appears to be a glimmer of light after Mnuchin signalled agreement over a fresh bout of direct payments. No doubt, there is reason to believe that democrats will hold off on approving a major package that might boost Trumps re-election hopes," said Josh Mahony, senior market analyst at IG.

And on the Continent, the European Union denied an earlier FT report of a breakthrough on state aid rules - which likely accounted for weakness in the German Dax going into the close of the session.

Against that backdrop, stocks finished well off their earlier highs, with the Stoxx 600 up 0.2% to 361.8, while the German Dax dipped 0.23% to 12,730.77.

The FTSE Mibtel and French Cac-40 made small gains of 0.24% and 0.43%, respectively.

Helping to lift investor sentiment were a stronger-than-expected reading on initial jobless claims Stateside and the latest earnings reports out of H&M and STMicroelectronics.

Overnight, the White House said that it had significantly increased its offer to Democrats for new spending.

Shares were also boosted by a final reading of German manufacturing activity in September which showed an accelerating recovery from the Covid-19 impact, with IHS Markit's Purchasing Managers index (PMI) rising to 56.4, even though it was below a flash estimate of 56.6.

Spanish and French PMI readings were better than expected, while the broader euro zone recovery was in line with expectations.

Shares in Swedish fashion chain H&M rose more than 6% as the company said it had hurdled the worst effects of the Covid-19 pandemic with better-than-expected third-quarter earnings.

Computer chipmaker STMicroelectronics was up 7% after stronger-than-forecast third-quarter revenue of $2.67bn.

Sector peers Infineon Technologies, Dialog Semiconductor and ASM International all gained on the news.

Halfords shares soared by almost 32% as the company lifted earnings guidance after a boom in bicycle sales during the summer period as Britons vacationed at home.

Bayer shares plunged 8% as the German pharmaceutical and chemicals company said 2021 core earnings would be slightly lower. The company said lower commodity prices were hurting sales.

Rolls-Royce shares slumped 10% as the UK aircraft engine maker said it would tap shareholders for £2bn through a heavily discounted rights issue and also raise another £3bn in bonds and loans.