Oil, mining stocks help EU shares rebound from losing run

European shares rebounded on Wednesday after a four-day losing streak, as higher commodity prices helped offset fears around Europe's worsening COVID-19 situation and the prospect of severe restrictions.

The pan-European STOXX 600 index climbed 0.4 per cent after recording its worst session in nearly two months on Tuesday amid a resurgence in coronavirus cases and fears of rising interest rates.

Oil stocks rose 1.2 per cent, set for their biggest jump in over a month, with crude prices inching higher as investors remained sceptical about the effectiveness of a US-led release of oil from strategic reserves.

Miners gained 0.8 per cent, tracking higher copper prices on easing concerns over Chinese demand, while travel stocks slid over 1 per cent on prospects of harsher travel curbs.

European stocks are on course for weekly losses, as the return of Covid-19 curbs, rate hike and inflation concerns sparked fears of a weaker economic growth outlook.

"There's a two-way pull between macro concerns and what's happening bottoms-up in terms of corporate profits," said Nick Nelson, head of European equity strategy at UBS, adding that while the third quarter has been one of the decade's best reporting seasons for Europe, macro concerns such as a rise in US bond yields and Covid-19 cases have been holding stocks back.

"People are waiting to see what impact Covid measures will have on economic growth in Q4 and next year. If the situation deteriorates and we see more aggressive responses from governments, there will be concerns over the overall European economic growth profile."

Latest Refinitiv data shows profits of companies listed on the STOXX 600 are expected to rise 58.8 per cent to 102.7 billion euros ($115.4 billion) from a year ago – another drop from last week's 60.4 per cent estimate, and 60.7 per cent from the week before that.

Meanwhile, Ifo Institure survey showed German business morale deteriorated for the fifth month running in November, as supply bottlenecks in manufacturing and a spike in coronavirus infections clouded the growth outlook.

Telecom Italia jumped 8.3 per cent following news reports that KKR is considering boosting its offer for the company after its top investor Vivendi (VIV.PA) called the initial one too low.