Key facts
- Europe's STOXX 600 index closed 0.2% lower, paring earlier losses.
- Oil prices narrowed gains after Iran and Israel indicated a halt in attacks.
- Monte dei Paschi di Siena shares rose 13% following an unsolicited bid from Intesa Sanpaolo.
- Zealand Pharma shares fell 22.7% due to high patient dropout rates in a drug trial.
- European technology stocks provided support, with the subindex rising 1.3%.
- The chemicals sector was the worst performer, declining 1.5%.
Europe's STOXX 600 index closed subdued, paring earlier gains as oil prices narrowed after signs of a pause in attacks between Iran and Israel. The pan-European index ended 0.2% lower at 621.73 points, after hitting a two-week low earlier in the session. Crude prices had climbed as much as 5% following renewed Israeli strikes on Iran and attacks on Lebanon, but gains later narrowed to about 1% after U.S. President Donald Trump urged restraint and Iran's military announced a halt in attacks, helping to steady sentiment.
Italy's banking sector was a key focus, with Monte dei Paschi di Siena (MPS) gaining 13% after Intesa Sanpaolo, Italy's largest banking group, announced an unsolicited cash-and-share bid valued at €30.6 billion ($35 billion) for the lender. Intesa slipped 1.4% on the news. Analysts noted potential long-term benefits for Intesa but also substantial execution uncertainty. Banco BPM, which had also proposed a merger with MPS, saw its shares marginally higher.
Technology stocks supported the broader market as U.S. tech names rebounded from a sharp selloff late last week. The European technology subindex was the day's strongest performer, rising 1.3%. Investors are now focused on Thursday's European Central Bank policy decision, with markets pricing in a 25-basis-point rate hike amid concerns that the Iran conflict could intensify Europe's energy crunch and revive inflation. However, the weaker Eurozone economy presents a challenge for the ECB in balancing inflation control with avoiding a deeper slowdown.
Among other movers, drugmaker Zealand Pharma tumbled 22.7% after trial data for its drug showed high patient dropout rates. The chemicals sector was the worst performer, declining 1.5%, with Goldman Sachs warning of downside risks. Asian markets stabilized as investors bought the dip in semiconductor stocks, though higher bond yields continued to test equity valuations.