European shares ended flat yesterday as losses among drugmakers offset energy share gains following an Opec deal to cut output, while Commerzbank slid after the German lender froze dividend payments.
The European oil and gas index soared 4.3%, making its best day in seven months. Tullow oil jumped 9.8%, while heavyweights Royal Dutch Shell, Total and Eni were up 4.2%-6.6%.
The Organisation of the Petroleum Exporting Countries (Opec) agreed on Wednesday to cut output to 32.5mn-33mn barrels per day from around 33.5mn barrels, estimated by Reuters to be the output level in August.
Ronny Claeys, senior strategist at KBC Asset Management, said the Opec agreement was good news for oil companies, which could now outperform over the next six months.
But some investors questioned the effectiveness of the deal and crude prices pulled back yesterday after posting a strong rally in the previous session on the back of the deal.
“The market reaction to the Opec deal was overdone. Crude prices are stuck in a range and with Opec representing less than 40% of global output, crude prices can rise but not that much,” said Marco Vailati, head of research and investment at Cassa Lombarda in Milan.
The Pan-European STOXX 600 ended flat after rising as much as 1.1% earlier in the session, dragged back down by weakness in drugmakers and travel stocks.
Vailati said he expected European equities to continue see-sawing.
“Europe companies are expensive and earnings growth is sluggish but on the other hand there is support from the central bank, which is flooding the market with liquidity,” he said.
Commerzbank fell 3.1%, the heaviest faller on the DAX after the German lender said it would cut more than a fifth of its workforce and suspended its dividend.
But Markus Huber, trader at City of London markets, said the harsh measures could help restore investor confidence.
“Although this step is painful, it is necessary in order for things to finally turn around for Commerzbank. Also, this combined with laying off close to 10,000 people seems to go a long way to convincing investors that Commerzbank is committed to turning things around,” he said.
Novo Nordisk fell 3.5%, touching a 19-month low, after the world’s largest insulin maker said it was cutting jobs as a part of a plan to reduce costs.
Shares in Lufthansa fell 2.7%, hurt by concerns that its plans to boost its low-cost brand would neither lower costs nor head off larger rivals.
Capita slumped 26.7% to a four-year low after the British outsourcing group cut its full-year profit outlook. It is the second support services group to warn that clients are delaying decisions following Britain’s vote to leave the EU.