European stocks close at two-week highs on Ukraine peace talks

German share price index DAX graph is pictured at the stock exchange in Frankfurt
FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, March 15, 2022. REUTERS/Staff

March 16, 2022

By Sruthi Shankar and Shreyashi Sanyal

(Reuters) -European stocks closed at over two-week highs on Wednesday after fresh talks of compromise from Russia and Ukraine boosted gains spurred by China’s promise to roll out more economic stimulus.

Moscow and Kyiv discussed a status for Ukraine outside of NATO, lifting hopes for a breakthrough after three weeks of war.

The pan-European STOXX 600 index closed up 3.1%, at its highest level since Feb. 28.

Markets also climbed after China’s Vice Premier Liu He said Beijing would roll out more measures to boost the Chinese economy as well as favourable policy steps for its capital markets.

“Today has delivered a double-whammy of gifts for embattled markets,” said Chris Beauchamp, chief market analyst at online trading platform IG.

“China stimulus headlines and Ukraine deal reports will always give stocks a lift, and to get them both on the same day has meant risk appetite has surged in impressive style.”

Dutch tech investor Prosus, which has a huge stake in China’s Tencent, surged nearly 23.9% after hitting all-time lows in the previous session. The stock led the wider technology index up nearly 6.6%.

Other China-exposed sectors such as miners and autos rose 3.6% and 5.2%, respectively. Luxury stocks LVMH, Richemont and Hermes, also reliant on China for a large part of their revenue, gained between 4.8% and 7.8%.

The Ukraine crisis has also sent commodity prices soaring, with crude prices breaching $139 a barrel at one point and raising fears of high inflation.

While crude prices are trading at $102, investors worry about aggressive tightening by major central banks to tame inflation.

The U.S. Federal Reserve is widely expected to raise interest rates by 25 basis points when it releases its policy decision at 1800 GMT on Wednesday.

Investors will be looking closely at the updated quarterly economic and interest rate projections, the first concrete guidance about how inflation and the Ukraine crisis has influenced policymakers.

Among other stocks, Sweden-based private equity fund EQT jumped 11.9% after it said it had agreed to buy investment firm Baring Private Equity Asia (BPEA) in a deal worth 6.8 billion euros ($7.5 billion).

German carmaker BMW gained 4.1% despite lowering its profit margin expectations for its automotive segment for 2022 due to the war in Ukraine.

(Reporting by Sruthi Shankar and Shreyashi Sanyal in Bengaluru; Editing by Anil D’Silva and Richard Chang)