European Stocks Lifted by Higher Oil Prices and Stimulus Potential

European shares rose on Wednesday, with higher oil prices and the chance of more monetary stimulus helping markets that were sent reeling by Britain’s vote to exit the European Union.

The pan-European STOXX 600 index, which had slumped 11 percent over the course of Friday and Monday, rose 1.2 percent, building on a 2.6 percent gain in the previous session.

The FTSEurofirst 300 also stood 1.2 percent higher, though both the STOXX 600 and the FTSEurofirst remain down by about 12 percent since the start of 2016.

The shares of European oil majors rose as the impact from a potential strike in Norway lifted oil prices.

European stocks were further supported by a drop in sovereign bond yields, with France’s 10-year bond yield dropping to a record low amid expectations of further monetary stimulus to offset the negative impact from last week’s Brexit vote.

Those signs of an easing in credit market tensions helped to lift European bank stocks, with Intesa up 5 percent.

“The central banks don’t have much ammunition left, but I’m sure they will rally round and provide verbal support and try to provide actual support for the markets,” said HED Capital’s managing director Richard Edwards.

Southern European bond yields also tumbled, with Spain’s 10-year bond yield falling to 1.273 percent – its lowest since April last year.

Credit Suisse equity strategist Andrew Garthwaite backed Spanish equities, pointing to signs of an economic recovery in the country. “Spain looks the best of the peripheral countries,” he said in a research note.

Shares in Swiss asset manager GAM rose 5 percent as investors welcomed its move to buy Cantab Capital Partners.

Traders said the lack of any evident rush among British and European politicians to invoke Article 50 of the EU’s Lisbon Treaty, which sets out the process for a state to leave the bloc, was also helping to ease some investor concerns.

Britain’s outgoing Prime Minister David Cameron said he had not faced overwhelming pressure to trigger the exit clause immediately, despite some public statements to the contrary.