By Susan Mathew and Anisha Sircar
(Reuters) – European stocks rallied on Tuesday, drawing on strength in Asian markets and Wall Street, as peace talks between Russia and Ukraine gave the most tangible sign yet of a progress towards negotiating an end to the war.
The pan-European STOXX 600 index climbed 1.6% to its highest level in nearly a month and extended gains for a third straight session as bond selling continued. [GVD/EUR]
All major sectors were in positive territory, led by automakers and banks which jumped 5.9% and 3.8% respectively.
Russia vowed on Tuesday to scale back military operations around kyiv and northern Ukraine to boost confidence. Ukraine has offered to adopt neutral status in the most detailed formula yet for a potential five-week settlement of the conflict.
“After the potential breakthrough in the peace talks, European equities accelerated the gains made earlier in the day as there was genuine concern, not only about the violence on Europe’s doorstep, but also effects on commodities,” said Susannah Streeter, head of investments and markets. analyst at Hargreaves Lansdown.
Germany’s 2-year yield briefly turned positive for the first time since 2014, while the 2-year/10-year US Treasury yield curve approached another step towards inversion. [GVD/EUR] [US/]
“You don’t see the same moves in German Treasury markets as you do in the US, but soaring inflation could also prompt the European Central Bank to tighten faster than expected, which will drive up the cost of life for consumers… The other worry is the possible indicated recession,” added Streeter.
Investors are also focusing on oil and gas supplies after Russia said it would accept payments for its gas exports in roubles. Russian gas accounts for around 40% of Europe’s total consumption and the move could exacerbate a crisis on the continent and fuel inflation.
Gains in London’s FTSE 100 were dampened by a 2.5% decline in lender Barclays after one of its top investors sold shares roughly equivalent to a 3% stake in the bank.
The STOXX 600 is on track to end March with small gains – its first month in the black this year. But the index is on track for its first quarterly loss in eight as concerns over widening inflation given soaring commodity prices and the resulting hit to economic growth limit risk appetite.
France and Germany have seen bigger than expected declines in consumer confidence this month as government measures to deal with rising inflation and fuel costs provided little relief after the Russian invasion, surveys have shown. [nL2N2VW0GX]
Maersk shares fell 4.1% after the Danish shipper said the Shanghai lockdown would hurt trucking services and increase transport costs, while the world’s biggest cement maker Holcim gained 3,000. 9% after declaring it was leaving the Russian market.
(Reporting by Susan Mathew and Anisha Sircar in Bengaluru; Editing by Uttaresh.V, Sherry Jacob-Phillips and Ed Osmond)