European shares edge higher as auto, chemical stocks rise

By Johann M Cherian

May 27 (Reuters) – European shares edged up in the early hours on Wednesday, trading close to an all-time high hit before the U.S.-Iran war started, driven by auto and chemical stocks, while investors kept a ​wary eye on escalating tensions in the Middle East.

The pan-European STOXX 600 ‌index edged up 0.2% to 629.51 points by 0829 GMT, bringing it about 1% away from a record high hit in February before the conflict started.

Automobiles and parts was among the top gainers across sectors, rising 2.6%, with Volvo Cars jumping 7% after the company said it received a U.S. government ‌approval that ​would allow it to continue selling vehicles in the ⁠country.

The sector was also lifted ⁠after data showed that registrations in the European Union, Britain, and the European Free Trade Association rose 7% in April, taking the total for January through April 4.8% above a year earlier.

Chemical stocks also gained over 1.3% as AkzoNobel shot up 16% ​after the paint maker rejected a joint cash takeover offer of €73 ($85) per share from rivals Nippon Paint <4612.T> and Sherwin-Williams .

Meanwhile, escalating tensions in the Middle East kept gains in ⁠check, as Iran called recent U.S. strikes a ⁠violation of the ceasefire, while Israel bombed Lebanon.

“Markets are sort of ​just putting it to the back of their mind,” said Michael Hewson, a senior financial analyst ​at iFOREX Europe.

“The new status quo is essentially continued uncertainty about a ‌ceasefire, and until such times as things deteriorate really badly, they’re going to work on the basis that there’s going to be a resolution at some point.”

Brent crude prices lost 2%, but at $97 a barrel, they kept inflation worries at the top of investors’ ⁠minds as markets priced in at least two 25-basis-point interest rate hikes by the European Central Bank this year.

Dutch central bank chief Olaf Sleijpen said that the persistence of energy price shocks ⁠will be a key factor ‌guiding the ECB’s next policy decision.

Among laggards, Naturgy lost 4.3% ⁠after Private equity fund CVC Capital Partners sold its entire 13.8% ​stake ‌in the Spanish energy company, worth around €4 billion ($4.66 billion).

Clean energy stocks ​such as ⁠Nordex fell 5%, while Orsted and Vestas lost 2% and 4%, respectively.

Pernod Ricard edged up 3.2%. Reuters reported that Indian investigators concluded that the beverage maker withheld the age and composition of its Scotch whisky imports to pay lower tariffs and asked the company to pay $314 million in back taxes.

($1 = 0.8588 euros)

(Reporting by Johann M Cherian in Bengaluru; Editing by Mrigank ​Dhaniwala and Rashmi Aich)