Europe ends mostly higher despite oil slump; Yellen eyed

European markets closed mostly higher on Tuesday as investors eyed the volatile trade in commodity markets, ahead of a speech from Federal Reserve Chair Janet Yellen.

Fed in focus


The pan-European STOXX 600 fluctuated throughout trade, before closing up 0.5 percent. Sectors finished mostly higher. London's FTSE 100 closed roughly flat while its European counterparts posted strong gains. Germany's DAX ended 0.4 percent up, while France's CAC jumped some 0.8 percent.

European markets started the shortened trading week fairly positive, with several investors looking ahead to key nonfarm payrolls data and the employment report from the U.S. due out this Friday. The data could shed more light on whether the Federal Reserve will increase interest rates at its meeting in April. The Fed could be more cautious, however, after data released on Monday suggested that consumer spending and inflation were still showing weak advances.

Yellen to speak

Markets will also be keeping a close eye on comments made by Fed chair Janet Yellen who is due to speak at The Economic Club of New York on Tuesday. Her comments follow remarks from several Fed officials over the past week that a rate hike could be coming soon.

"Investors are in wait-and-see mode ahead of Fed chair Janet Yellen's speech at the European market close with traders hoping for more clues on when the US central bank might next hike rates after mixed U.S. data yesterday and some hawkish Fed chatter in the run up to the Easter weekend," Mike van Dulken, head of research at Accendo Markets, wrote in a Tuesday note.

At Europe's close, U.S. markets traded mixed to lower as oil weighed on sentiment, while Asia's markets closed mostly lower on Tuesday.

Miners slide; VW shares fall

Basic resources delivered some of Europe's sharpest declines on Tuesday with the sector closing 2.2 percent down, amid a slump in oil and metal prices. Glencore fell almost 5 percent, closely followed by Anglo American, Rio Tinto and BHP Billiton, all of which closed more than 3.5 percent down.

Oil prices took a tumble on Tuesday, as concerns over a global supply glut continued to weigh. On Tuesday, a source familiar with Iran's thinking said that OPEC member Iran, was expected to attend a producers meeting in Doha in April, however this didn't mean they'd participate in negotiations over an output freeze, according to Reuters.

Brent crude and U.S. crude prices slid on Tuesday, both falling some 3.5 percent at Europe's close, standing around $38.78 and $37.98 respectively. Oil stocks reacted negatively, with the sector closing 1 percent lower.

In individual stock news, Embattled automaker Volkswagen came off session lows to close 1.6 percent down on Tuesday. This comes after a report by news agency DPA said that the German firm could scrap its dividend to conserve money, following the costs from its diesel-emissions scandal.

The U.S. Federal Trade Commission also dealt another blow to Volkswagen during trade, with the commission filing a suit against the firm for false vehicle advertising.

Banks feel the heat

The banking sector got off to a good start but quickly reversed gains to end lower. Germany's Deutsche Bank slipped 1.6 percent after board member Karl von Rohr told a local newspaper that a culture change at the lender will take some time.

In Italy, the chief executive of Banco Popolare told Il Sole 24 Ore over the weekend that the 1 billion euro capital raised required for it to merge with Banca Popolare di Milano could be a 50 percent rights issue and 50 percent in direct placements to institutional investors. Exane BNP Paribas cut its price target for Banco Popolare but raised its price target for Banca Popolare di Milano. Both banks however finished over 3.5 percent lower.

Shares in Banca Monte Dei Paschi Di Siena opened higher after it denied a report that the European Central Bank had asked it to carry out a 3 billion euro capital raise. But the lender's stock reversed course, tumbling to close almost 5 percent down after a report that U.S. fund Apollo is considering buying a majority stake in rival Carige and also purchase its bad loans.

EgyptAir plane hijacked

In other news, a passenger plane operated by EgyptAir originally scheduled to complete a domestic flight between Alexandria and Cairo was hijacked earlier on Tuesday and diverted north to Larnaca Airport in Cyprus. The alleged hijacker of an EgyptAir plane has since been arrested after hours of tense negotiations, according to Cypriot police.

Travel and leisure stocks, which are normally hit as a result of incidents like this, remained higher throughout trade, closing up over 1 percent.

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