Sun, Feb 27, 2022 page10

• European shares end nine-month lows with surge

  • Reuters
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  Europe’s main stocks indices roared back on Friday, lifting off nine-month lows with banks leading a broad-based rally as investors hunted for bargains following a bruising sell-off after Russia’s invasion of Ukraine.

  Hopes for diplomacy aided sentiment after the Kremlin said that Russian President Vladimir Putin is ready to send a delegation to Minsk for negotiations with representatives of Ukraine.

  This came after missiles pounded Kyiv as Russian forces pressed their advance.

  

  The STOXX 600 ended the day up 3.32 percent at 453.53, after dropping to May lows on Thursday.

  All of the major indices jumped more than 3 percent, with London’s FTSE 100 up 3.91 percent at 7,489.46.

  The rally made back all of Thursday’s steep losses, but was not enough to pull the benchmark pan-European STOXX 600 index up for the week as the geopolitical tensions sent investors fleeing from riskier assets.

  The index marked its second week in the red, down 1.58 percent, and is off about 8 percent from its peak last month.

  “We don’t think this is a time to be outright negative on equities — sentiment is already poor, at least some of the risks have been priced in,” UBS Global Wealth Management chief investment officer Mark Haefele said.

  Banks jumped 4.3 percent to regain half of the previous session’s dive, but they braced for impact from likely new sanctions from the West on Russia that could halt Russian banks’ access to European financial markets.

  The possibility of the conflict slowing the hawkish pace of central banks have also weighed on lenders.

  The European Central Bank (ECB) on Thursday affirmed its commitment to ensure price and financial stability.

  The mood remained fragile going into the weekend, as was evident by defensive buying. Industrial stocks, utilities, healthcare and consumer staples were among the biggest boost to the STOXX 600.

  “As long as uncertainty persists we expect [European equities] to remain volatile and defensive,” HSBC analysts wrote in a note. “Commodity sensitive sectors such as energy and basic materials may also perform strongly, thereby reversing the value rally... The scale of action taken by NATO countries is likely to determine how markets react.”

  With oil and gas prices soaring in the wake of the Ukraine crisis, investors fear that inflation would run even hotter and disrupt economic recovery in the eurozone due to its heavy reliance on Russia for gas supplies.

  The Ukraine conflict might reduce the bloc’s economic output by 0.3 to 0.4 percent this year, the ECB’s lead economist said.

  Goldman Sachs cut its 12-month target for the STOXX 600 to 490 — about 8 percent higher from current levels — from 530 previously.

  Among individual stock, Porsche SE and Volkswagen gained 3.8 percent and 5.2 percent respectively after the automakers fleshed out details of a possible Porsche listing.

  French car parts maker Valeo dropped 10.5 percent after warning on core profit margin.

  The FTSE 100 rebounded, but the blue-chip index declined 0.32 percent from a week earlier — its second consecutive weekly drop.

  Banks and insurers rose 5.4 and 5.3 percent respectively.

  “The markets are telling us that the sanctions [on Russia] aren’t particularly dramatic relative to what they could be,” said Russ Mould, investment director at AJ Bell.

  “Some of it is people looking to buy on the dip and taking the alleged advice by financier Nathan Rothschild that you should buy on the sound of cannons and sell on the sound of trumpets,” Mould said.
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