Europe’s stock markets struggled yesterday to find firm ground one day after bumper gains as oil prices quickly lost their sheen and investors were greeted by fresh economic gloom.
Oil got only temporary gains from energy giants Saudi Arabia and Russia conditionally agreeing to freeze crude output at January levels in a bid to stabilise oil prices, which have collapsed by 70% since mid-2014 due to chronic oversupply.
The Saudi-Russian announcement was somewhat of a disappointment for the market, which had been hoping for cuts, as freezing oil production levels wouldn’t eliminate overproduction, nor address weak demand amid slowing growth in world economy and a strong dollar.
In late London trading benchmark Brent crude oil was down 64 cents to $32.75 a barrel, while the main US contract, WTI, was down 0.43 cents to $29.01.
Oil companies nevertheless benefited from the news, with BP gaining 1.4% and Royal Dutch Shell climbing 1.6%, helping London’s main FTSE 100 index post a 0.7 gain for the day.
In London, the FTSE 100 up 0.7% at 5,862.17 points; Frankfurt - DAX 30 down 0.8% at 9,135.11  points; Paris - CAC 40 down 0.11% at 4,110.66 points and Milan - FTSE MIB fell 0.5% at 16,958  points at the close yesterday.
Frankfurt’s DAX dropped as the ZEW economic institute’s survey showing that German investor sentiment hit a 16-month low in February on fears over the recent oil collapse and China’s slowdown.
“Whilst the German and region-wide ZEW sentiment figures weren’t as bad as first thought ... they were still woeful,” said Spreadex analyst Connor Campbell.
“In stark contrast to the Draghi-sustained surge on Monday, the DAX and the CAC look decidedly out of breath.”
The ZEW’s investor confidence index declined by 9.2 points to 1.0 point in February, its lowest level since October 2014. Analysts had been expecting an even steeper drop to zero points this month.
And eurozone confidence shed 9.1 points to stand at 13.6 points.
“Financial market experts’ sentiment concerning the economic development of the eurozone has weakened,” the ZEW declared in a gloomy warning.
Europe’s stocks had soared Monday after European Central Bank president Mario Draghi said the bank was ready to act to stimulate the eurozone economy and push up inflation.
In Asia, markets rallied on hopes that authorities will step in to boost growth in major economies.
Shanghai surged more than 3% on speculation China is preparing stimulus measures to boost the world’s number two economy.
Chinese stocks were also given a lift by official figures showing bank lending surged to a record high in January, as credit gushed to help boost the flagging economy.
Analysts expect further monetary loosening after six interest rate cuts in the 12 months to November and several cuts in the amount of funds banks keep in reserve.
Currency traders are also pulling back from bets on a devaluation of the yuan as China strengthens support for its currency and prospects for a US interest rate increase dim.  
US stocks pushed higher yesterday, playing catch up with Monday gains elsewhere after a three-day holiday weekend.