European stocks struggle as oil gains slip away

Europe's stock markets struggled Tuesday to find firm ground one day after bumper gains as oil prices quickly lost their sheen and investors were greeted by fresh economic gloom.

Oil got only temporary gains from energy giants Saudi Arabia and Russia conditionally agreeing to freeze crude output at January levels in a bid to stabilise oil prices, which have collapsed by 70 percent since mid-2014 due to chronic oversupply.

The Saudi and Russian oil ministers, along with their Venezuelan and Qatari counterparts, "agreed to freeze the production at (the) January level provided that other major producers follow suit," said Qatar's Energy Minister Mohammed bin Saleh al-Sada.

"The stock market rally of the past two days has petered out with investors again taking their cue from a slumping oil price," said CMC Markets analyst Jasper Lawler.

The Saudi-Russian announcement was somewhat of a disappointment for the market, which had been hoping for cuts, as freezing oil production levels wouldn't eliminate overproduction, nor address weak demand amid slowing growth in world economy and a strong dollar.

In late London trading benchmark Brent crude oil was down 64 cents to $32.75 a barrel, while the main US contract, WTI, was down 0.43 cents to $29.01.

Oil companies nevertheless benefitted from the news, with BP gaining 1.4 percent and Royal Dutch Shell climbing 1.6 percent, helping London's main FTSE 100 index post a 0.7 gain for the day.

The Paris CAC however slid 0.1 percent.

Frankfurt's DAX meanwhile dropped 0.8 percent as the ZEW economic institute's survey showing that German investor sentiment hit a 16-month low in February on fears over the recent oil collapse and China's slowdown.

- 'Woeful' investor confidence -

"Whilst the German and region-wide ZEW sentiment figures weren?t as bad as first thought ... they were still woeful," said Spreadex analyst Connor Campbell.

"In stark contrast to the Draghi-sustained surge on Monday, the DAX and the CAC look decidedly out of breath."

The ZEW's investor confidence index declined by 9.2 points to 1.0 point in February, its lowest level since October 2014. Analysts had been expecting an even steeper drop to zero points this month.

And eurozone confidence shed 9.1 points to stand at 13.6 points.

"Financial market experts' sentiment concerning the economic development of the eurozone has weakened," the ZEW declared in a gloomy warning.

Europe's stocks had soared Monday after European Central Bank president Mario Draghi said the bank was ready to act to stimulate the eurozone economy and push up inflation.

In Asia on Tuesday, markets rallied on hopes that authorities will step in to boost growth in major economies.

- Shanghai leads the way -

Shanghai surged more than three percent on speculation China is preparing stimulus measures to boost the world's number two economy.

Chinese stocks were also given a lift by official figures showing bank lending surged to a record high in January, as credit gushed to help boost the flagging economy.

Analysts expect further monetary loosening after six interest rate cuts in the 12 months to November and several cuts in the amount of funds banks keep in reserve.

Shanghai led the way, finishing up 3.3 percent, while Hong Kong ended 1.1 percent up. The gains come as speculation intensifies that Beijing is preparing further stimulus after data Monday showed a slide in exports and imports.

Currency traders are also pulling back from bets on a devaluation of the yuan as China strengthens support for its currency and prospects for a US interest rate increase dim.

US stocks pushed higher Tuesday, playing catch up with Monday gains elsewhere after a three-day holiday weekend.

The Dow Jones Industrial Average was up 0.7 percent at 16,089.79 points approaching midday.

- Key figures around 1630 GMT -

London - FTSE 100: UP 0.7 percent at 5,862.17 points (close)

Frankfurt - DAX 30: DOWN 0.8 percent at 9,135.11 (close)

Paris - CAC 40: DOWN 0.11 percent at 4,110.66 (close)

Milan - FTSE MIB: DOWN 0.5 percent at 16,958 (close)

EURO STOXX 50: DOWN 0.7 percent at 2,813.33

New York - Dow: UP 0.7 percent at 16,089.79

New York - S&P 500: UP 1.0 percent at 1,882.71

New York - Nasdaq: UP 1.5 percent at 4,401.86

Tokyo - Nikkei 225: UP 0.2 percent at 16,054.43 (close)

Shanghai - composite: UP 3.3 percent at 2,836.57 (close)

Hong Kong - Hang Seng: UP 1.1 percent at 19,122.08 (close)

Euro/dollar: DOWN at $1.1142 from $1.1155 on Monday

Dollar/yen: DOWN at 113.83 yen from 114.60 yen