European shares ease as oil stocks fall on demand concerns

Producer prices are an early signal of inflationary trends because their changes are usually transferred onto final consumers.

European shares slipped on Tuesday as heavyweight energy stocks fell on worries about demand for oil after weak economic data in the US, while eurozone producer prices declined for a fifth-consecutive month in February.

The STOXX 600 index closed 0.1% lower, with oil and gas stocks reversing early gains and weighing on the pan-European index.

Oil majors such as Shell, BP, Tenaris and TotalEnergies shed between 1% and 2.5% as crude prices gave up early gains after data showed US manufacturing activity slumped in March to the lowest level in nearly three years as new orders plunged.

"There is also growing speculation that the recent Opec output cut was predicated on anticipated falling demand going forward, rather than a pure pricing play per se," said Stuart Cole, head macro economist at Equiti Capital.

Energy stocks had clocked their biggest one-day gain since November on Monday after Opec+ announced voluntary production cuts of 1.66m barrels per day from May until the end of 2023.

"The surprise production cut from Opec+ continues to stoke concerns around inflation," Sophie Lund-Yates, lead equity analyst at Hargreaves Lansdown, said in a note.

Meanwhile, eurozone producer prices fell for a fifth-consecutive month and by more than expected in February, almost entirely due to declining energy prices.

Producer prices are an early signal of inflationary trends because their changes are usually transferred onto final consumers.

 • Reuters