Resources stock rally drives European shares to 2-week closing high

  • Reuters
  • Stock Market News
Resources stock rally drives European shares to 2-week closing high
Credit: © Reuters.

* STOXX 600 up 0.4 pct at close

* Zodiac plummets on another profit warning

* Swedish fashion retailer H&M down on sales miss

* Hikma jumps following results (Recasts, adds quote and detail, updates prices at close)

By Helen Reid and Kit Rees

LONDON, March 15 (Reuters) - European shares achieved their highest closing level in two weeks on Wednesday, boosted by basic resource and oil stocks, while French aeroplane seat-maker Zodiac slumped after its latest profit warning.

The pan-European STOXX 600 .STOXX index was up 0.4 percent at its close, with the market focused on potentially divisive elections in the Netherlands and a U.S. Federal Reserve policy meeting that could signal how much monetary tightening to expect during the remainder of the year.

A recovery in oil prices after a surprise U.S. crude stockpile drawdown eased worries about a supply glut and spurred a rally in basic resources stocks with the sector .SXPP up 1.7 percent, followed by major European oil-related stocks .SXEP which rose 1.2 percent. OUT1V.HE and Glencore GLEN.L were among the top gainers, with their shares up 7.3 percent and 2.9 percent respectively. Outokumpu's shares jumped after the European benchmark price for ferrochrome, a crucial raw material for steel production, was set lower than expected. . stocks .SX7P also lent support, gaining 0.9 percent ahead of an expected U.S. interest rate hike. Higher interest rates benefit banks' margins, which have struggled in Europe's low rate environment.

"It's almost certain we will see an increase in interest rates from the Federal Reserve tomorrow. The question now is not if they will increase, but by how much," Jordan Hiscott, chief trader at ayondo markets, said in a note.

"Going forward, with (a) possible three rate increases for 2017 alone, I predict we will see trepidation for the equity markets in general."

British drugmaker Hikma HIK.L was the biggest STOXX gainer, jumping 8 percent after it posted a 2.4 percent rise in full-year operating profit on growth in its injectables and branded business, which offset weakness in its generic drugs.

Zodiac ZODC.PA was the biggest European faller, after it warned on profit after the close on Tuesday. The company, which engine maker Safran SAF.PA is seeking to acquire, said it sees full-year operating income falling 10 percent against a previous forecast of a 10-20 percent rise. fashion retailer H&M HMb.ST was also among the biggest fallers, with its shares down more than 5 percent after it posted its first monthly sales drop in four years. Europe-wide retail sector index .SXRP was the worst-performing, down 0.3 percent, with Zara owner Inditex 's ITX.MC shares roughly flat after releasing full-year earnings. utility E.ON < EONGn.DE> fell 3.5 percent after it posted a record 16 billion euro ($17 billion) loss due to impairments on its former power plant unit Uniper UN01.DE which it spun off last year.

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