European shares slip as U.S. reserve release plan pressures oil stocks

By Susan Mathew

(Reuters) – European shares slipped in choppy trade on Thursday, widening a quarterly loss that would be the first in two years, as oil stocks slid on news that the United States was considering tapping into its oil reserves.

The pan-European stock index was down 0.1%, as of 0941 GMT, after early gains that were fuelled by some defensive sectors such as utilities.

Oil and gas stocks fell 0.8% as the United States weighed releasing a record amount of up to 180 million barrels from its strategic petroleum reserve to control prices that have surged in the wake of a conflict between Russia and Ukraine. [O/R]

TotalEnergies SE, BP Plc and Shell Plc fell between 0.8% and 1.5%.

“Average oil price is going to stay higher than anticipated at the start of year and will be reflected in inflation and that means that the central banks will have no other choice than hiking rates,” said Charles-Henry Monchau, chief investment officer at Syz Bank.

Data showed French inflation rose more than expected to hit a record high in March.

Meanwhile, Germany triggered an emergency plan under which Europe’s largest economy could ration power if Russia’s rouble payment demand for gas were to disrupt or halt supplies.

But Germany would continue to pay in euros as per assurances from Russian President Vladimir Putin, a government spokesperson said.

The STOXX 600 is down about 5.8% for the January-March period after seven straight quarters of gains, as investors remain circumspect in the face of the Ukraine crisis and its impact on inflation and economic growth.

For the month, however, the index was on course to log its first monthly gain of 2022. Analysts have attributed this partly to equities appearing to be a better hedge to inflation than bonds.

“European earnings are seeing positive revisions versus the U.S. and that is a tailwind. Europe is very much cyclically driven and as cyclicals are up, the equity index benefits,” Monchau said.

“There is some institutional money that may continue to be invested in risk assets.”

Among individual stocks, Sweden’s H&M fell 8.4% after reporting a smaller profit than expected for the December-February period.

Brewin Dolphin soared 60.4% after Royal Bank of Canada made a 1.6 billion pound ($2.1 billion) all-cash offer for the British wealth manager.

(Reporting by Susan Mathew in Bengaluru; Editing by Anil D’Silva and Subhranshu Sahu)