European shares steadied on Tuesday after strong gains in the previous session, with a rally in chemical stocks offsetting weaker energy shares that fell on the back of lower oil prices.
The STOXX Europe 600 Oil and Gas index dropped 0.8 per cent, the worst sector performer, as oil prices fell after Venezuela said that global supplies needed to fall by 10 per cent in order to bring production down to consumption levels.
Henry Croft, analyst at Accendo Markets, said that a swift retrace in oil prices was hampering sentiment.
“The credibility of bullish production freeze rhetoric from Venezuela is understandably being questioned in the run-up to next week’s Algiers meeting, while worries about additional supply worsening the global glut add to the mix,” Croft added.
Shares in BP, Saipem and Tullow Oil fell between 0.3 per cent and 2.4 per cent.
However, losses in the energy sector were offset by a 0.6 per cent rise in the European chemicals index, helped by a 1.2 percent rise in German drugmaker Bayer , which said its two best-selling drugs had a higher annual peak sales potential than previously targeted.
The pan-European STOXX 600 index was up 0.04 per cent by 0820 GMT after rising about 1 per cent in the previous session. The index is still down more than 6 per cent this year.
Among other sharp movers, shares in business services firm Regus slumped after a share placement. The stock, down 5.5 per cent, was the worst performer on the STOXX 600 index.
Online trading company IG Group fell 3.8 per cent after the company said that financial markets had become "increasingly subdued” in the two months after Britain’s shock vote to leave the European Union, presenting clients with limited trading opportunities.
Kingfisher rose 1.8 per cent as strong demand in Britain and Poland helped Europe’s largest home improvement retailer to beat forecasts for first-half profit. However, the company said it remained cautious on the outlook for France, its most profitable market.
“Today's comments show that the group is off to a good start. However, CEO Veronique Laury will have her hands full if she is to successfully roll out the changes across the group's 1,100 stores in 10 European countries, and we are still in the early stages of this ambitious five-year plan,” George Salmon, equity analyst at Hargreaves Lansdown, said.
Investors also awaited the outcome of a meeting of the US Federal Reserve on Wednesday. Markets have been choppy in recent weeks over the Fed’s intentions, which remain unclear due to both hawkish and dovish comments from several Fed officials.
The consensus is that the Fed will leave interest rates unchanged at the end of its two-day meeting from Tuesday, with investors focusing on the statement as well as Chair Janet Yellen’’ speech for clues on the timing of the central bank's next interest rate increase.