European shares supported by gains in retail, oil stocks

(Reuters) – European stocks ended higher on Friday, with the benchmark STOXX 600 clocking its third straight week of gains as a jump in commodity-linked stocks helped to counter worries about rising coronavirus cases and an impasse over new U.S. stimulus.

The pan-European STOXX 600 index .STOXX rose 0.5%.

Miners including Rio Tinto RIO.L, Glencore GLEN.L and BHP BHPB.L rose between 1.2% and 2.4% as metal prices rallied on continued strong demand in top consumer China and potential supply disruptions. [MET/L]

The oil & gas sector .SXEP also jumped 1.5% as crude prices were buoyed by successful COVID-19 vaccine trials. [O/R]

“European markets are gradually gaining ground, with vaccine hopes being counteracted by U.S. stimulus and lockdown fears,” said Joshua Mahony, senior market analyst at IG.

Data from Bank of America showed investors pumped $27 billion into equity funds last week as positive COVID-19 vaccine updates led to euphoric buying of shares in worst-hit sectors such as banks, travel and leisure, and oil.

These sectors were among the top performers this week as investors bet a vaccine will revive economic growth faster, but worries about coronavirus shutdowns took the shine off a rally in these so-called value stocks.

Markets were also nervous about further stimulus for the U.S. economy after Treasury Secretary Steven Mnuchin said key pandemic lending programmes at the Federal Reserve would expire on Dec. 31, putting the outgoing Trump administration at odds with the central bank.

The UK’s FTSE 100 .FTSE rose 0.3% as retail sales bounced in October and the British health minister said there were encouraging signs that virus cases were starting to flatten.

There was optimism on the Brexit front, with an EU official pointing to progress on “important files” as Britain negotiates on a future trading relationship with the European Union.

Italy’s BPER Banca EMII.MI rose 4.1% after its top investor threw its weight behind the idea of a merger with rival Banco BPM BAMI.MI, which gained 3.7%.

German fashion e-tailer Zalando ZALG.DE edged up 1.1% after its chief financial officer forecast an acceleration in growth next year.

British software company Sage SGE.L plunged 13.4% after reporting a 3.7% decline in full-year organic operating profit.