European shares advanced in early trade on Monday, led by energy and metals stocks that tracked firmer commodity prices, but analysts said the market was expected to be under pressure in the near term.
Energy shares got support from rising crude prices, which rose 5% to nearly $40 a barrel as analysts said the conflict between Israel and Hamas had reminded traders of the geopolitical risk to crude supplies from the Middle East. BP, Royal Dutch Shell, gas producer BG Group and Tullow Oil added between 3.3 and 4.6%. Miners also gained on the back of stronger metals prices.
But analysts said that the market was expected to come under renewed pressure in the near term. “The trading over the Christmas period has been somewhat disappointing and therefore in the short term, the reality is that that markets are going to remain volatile and continue to be under pressure,” said Henk Potts, equity strategist at Barclays Stockbrokers.
“There is also an expectation that corporate profitability is going to be under pressure. We think it’s going to drop by 20% during the course of 2009,” he added. (Reuters)