Europe close: Shares rally to finish higher

(Sharecast News) - European shares rallied to close higher in muted trading on Monday, as investors shrugged off worries over China's troubled property sector. The pan-European Stoxx 600 ended the session up 0.15% at 459.86 with regional markets mixed. A weaker session in Asia overnight saw shares in Hong Kong fall more than 2%, while US markets opened higher on Monday.

Chinese property developer Country Garden warned of a massive $7.6bn loss in the first half of 2023 and said it was struggling to meet its debt obligations as it suspended trading on 11 of its onshore bonds.

Shares in the company plunged 15%, sparking more concerns about the state of the world's second-biggest economy. Oil prices slid lower with Brent crude sliding below $86 a barrel.

China-exposed miners and oil producers fell, with Orron Energy lower, along with BP and Shell, while weaker copper prices also dampened sentiment. The US dollar rose sharply as investors sought a safe haven, with the dollar index, which tracks the currency against its major peers, was up 0.36% to 103.23, its highest level in more than a month.

"A crisis in the Chinese real estate sector is a story the market has heard before and not one which has typically come with a happy ending for stocks," said AJ Bell investment director Russ Mould.

"This latest calamity is reflective of a recovery which has not lived up to expectations since the world's second largest economy ditched zero-Covid measures at the end of last year."

"The usual catalogue of names with Chinese ties were under the pump including Burberry, Standard Chartered and Prudential. The one silver lining for the West may be a deflationary impact from China's woes which helps in the battle against inflation."

"The higher than anticipated rate of US producer price inflation reported on Friday - often a good indicator of the trajectory of consumer prices - is helping to sour sentiment and raises the stakes ahead of UK CPI figures on Wednesday this week."

"A significant fall to 6.8% is expected, anything short of that could prompt another surge in gilt yields - drawing groans from anyone set to remortgage or take out a new mortgage any time soon."

Among stocks making gains, Philips rose 4% after Dutch investment firm Exor took a 15% stake in the healthcare company.

B&M European Value Retail jumped as Deutsche Bank upped its target price for B&M from 610p to 680p on Monday, saying the retailer could stand to benefit from the demise of Wilko, the struggling discount chain which fell into administration last week. Wilko announced Monday that it was giving potential buyers until Wednesday to submit offers for a takeover.

UK housebuilders were also lower as evidence from surveys by estate agents Savills and Hamptons International mounted that landlords were are starting to sell-up and getting less for their properties, increasing downward pressure on prices. Persimmon and Taylor Wimpey were lower on the news.

Reporting by Frank Prenesti for Sharecast.com