European shares ended higher in volatile trade on Monday as slumping oil prices lifted shares of companies that benefit from lower fuel prices, such as airline Lufthansa, helping to offset a fall in energy companies' shares. Energy shares mirrored the fortunes of Brent crude, which slid to a new low at $47.61/barrel before staging a modest recovery late in the European day.
-- Lufthansa says profit to rise on lower oil prices
-- Continental eyes sales growth pick-up
Traders blamed a report by analysts at bank Goldman Sachs, who cut their three-month forecasts for Brent to $42 a barrel from $80. "Goldman Sachs' report on oil has turned up in the hands of US traders and here are the results," IG strategist Vincenzo Longo said. The STOXX 600 Oil & Gas index closed 1.3 percent lower, off its daily trough.
The FTSEurofirst 300 index of pan-European shares ended 0.6 percent higher at 1,357.09 points after trading as much as 1.1 percent higher in early trade and as low as 0.4 percent down as the US trading day got underway. German airline Lufthansa rose 1.7 percent in brisk volume after saying it expects the lower price of oil to cut its fuel bill for 2015 by 13 percent after the cost of hedging, setting it on course for a rise in profit this year.
"The tremendous oil price collapse is not adequately reflected in the airlines' share prices in my view," Jochen Rothenbacher, research and sales director at Equinet Bank in Frankfurt, said. "Historically, oil price collapses coincided with a weakening economy. This time it's different and the market has to learn that." German automotive supplier Continental rose 2.8 percent after saying it expects sales growth to quicken to around 5 percent this year as global passenger car production rises moderately.
Investors are on tenterhooks ahead of next week's European Central Bank policy meeting, which may bring further stimulus measures, and a parliamentary election in Greece next week. Greek shares rose 3.8 percent after a 6.8 percent fall last week. Polls over the weekend continued to show the far left Syriza party is leading by a small margin and would need to seek alliances to form a government. "Expect volatility to remain for the European stock markets in the near-term," said Hampstead Capital LLP hedge fund manager Lex van Dam.