Europe stock markets rally cools on rising oil prices

Upbeat data and rising oil prices helped European stock markets eke out some marginal gains yesterday, offsetting another jolt for chipmakers from the fallout of a US ban on trading with Huawei Technologies.At the end of a week that has seen European markets gain around 2%, and bond yields and the euro sink, escalating tensions between Washington and Iran also gave investors reason to be cautious about pushing ahead with this month’s rally.Helped by gains in oil prices that drove shares in Royal Dutch Shell, BP and Total higher, the pan-regional STOXX 600 index was just 0.05% higher by 0800 GMT.The benchmark index, has rallied nearly 5% so far this month, on signals from the Federal Reserve and the European Central Bank that they were ready to act to counter the impact of US-China trade tensions on a slowing global economy.“There is probably lingering positivity from the broadly dovish central bank statements this week from the ECB and the Fed,” said Connor Campbell, financial analyst at Spreadex in London.“That rally maybe running out of steam a little bit but it seems to be keeping the indexes in the green.”Investors will now look to a G20 summit in Japan next week for progress from the United States and China on resolving the differences that drove the worst monthly performance in European stock markets in more than two years in May.Frankfurt’s DAX recouped early losses to trade 0.21% higher after a survey yesterday showed higher activity in Germany’s services and manufacturing sector edged higher in June, suggesting that growth in Europe’s biggest economy has stabilised at a moderate pace in the second quarter.London’s FTSE 100 was flat at 7,425.08 points yesterday.Other surveys showed French business activity strengthened more than expected in June, and eurozone business activity picked up a touch this month.“Both the French and German figures were better than expected but also firmly in contraction territory,” said Campbell.The technology index fell 0.4%, and was among the biggest fallers, as British wafer maker IQE Plc warned it would report lower-than-expected revenue in 2019, citing the impact of the Huawei ban.Semiconductor companies were the hardest hit with Infineon, AMS and STMicroelectronics, Siltronic, Dialog Semiconductor dropping between 1.2% and 3.2%.Spain’s IBEX rose 0.7%, outperforming most European indexes. Meanwhile, sterling yesterday slipped to a whisker off recent five-month lows against the euro after Brexiteer Boris Johnson moved closer to becoming British prime minister, worrying investors that his government would make a no-deal Brexit more likely.It eased versus the dollar as well but stayed on course for a weekly gain against the greenback after the bank of England stuck to its message that interest rates would need to rise, contrasting with the US Federal Reserve which is now expected to cut rates from July.After a busy week for monetary policy, sterling traders will turn their attention back to British politics and the Conservative Party leadership contest.Johnson faces foreign minister Jeremy Hunt in a contest to succeed Theresa May as party leader and prime minister, with Johnson the odds-on favourite to secure a majority of votes from the Conservative Party. The new leader will be chosen by a ballot of party members, with the result due next month.Whoever triumphs, the new prime minister will try to wring a tweaked Brexit withdrawal deal more palatable to British politicians from a sceptical Brussels that has said there will be no further negotiation over the agreement.The current deal has been rejected three times by the British parliament, and if Johnson or Hunt cannot get it or another version passed, investors worry Britain will leave the European Union on October 31 without transitional trading arrangements in place with its largest trading partner.“Johnson is the firm favourite and based on our scenario analysis of a Johnson leadership, GBP could run into trouble this autumn,” ING analysts said in a note.sterling was trading flat by 1600 GMT at $1.2697. That still left the British currency up 0.7% this week, with most of the gains down to a selloff in the dollar after the Fed opened the door to looser monetary policy.But the pound has not fared as well against the euro, and was down 0.3% at 89.18 pence. It traded at 89.74 pence on Tuesday, the highest since January.