European Stocks Rise as Commodities Rally Buoys Miners, Energy

(Bloomberg) -- European equities gained on Wednesday, as a spike in commodity prices -- from oil and gas, to wheat and aluminum -- drove energy and miners higher, while signals from the Kremlin that it's ready to continue talks with Ukraine helped restore some risk appetite.

The Stoxx 600 Europe Index closed 0.9% higher, reversing its opening declines. Shell Plc, TotalEnergies SE and Rio Tinto Plc were among the biggest gainers, while utilities underperformed amid concerns over rising costs.

“While the economic and political outlook remains unusually unpredictable, some key market metrics show that European assets have now priced in elevated levels of uncertainty,” said Paul O'Connor, head of multi-asset at Janus Henderson Investors. “While the situation in the Ukraine could have enduring global effects, if the political spillovers broaden, investor psychology could shift to focusing on upside potential in European assets if the economic impact of the invasion is seen as being temporary or localized.”

Europe's main equities benchmark is on course for its worst quarter since the outbreak of the pandemic, as Russia's invasion of Ukraine exacerbated concerns that inflationary pressures will derail economic growth. A wave of sanctions against the bedrock of global commodity supplies has pushed oil prices above $110 a barrel, leading traders to reassess their expectations on everything from corporate profits to the path of rate hikes.

“Current events suggest near-term headwinds to real growth and stronger tailwinds for higher inflation,” Berenberg analysts Jonathan Stubbs and Edward Abbott wrote in a note. “Given an extending crisis and multiple risks, we see near-term equity risk skewed to the downside and macroagnostic strategies as more attractive for now.”

Among individual movers on Wednesday, Neste Oyj soared, after the world's biggest producer of renewable diesel said it will invest $1 billion to start making the fuel in the U.S. Ericsson, mired in a scandal over potential payments to the terrorist organization ISIS, slumped after the U.S. Department of Justice said it failed to make adequate disclosures about its operations in Iraq.

“Surging commodity prices raise stagflation risk, adding to central banks' dilemma,” Barclays strategists led by Emmanuel Cau said in a note. “Without quick de-escalation, the flight to safety may continue, but geopolitical-driven market dislocations, while painful, are typically short-lived and often bring medium-term opportunities.”

MARKETS

Equities: Euro Stoxx 50 up 1.5%, FTSE 100 up 1.4%, DAX up 0.7%, CAC 40 up 1.6%, FTSE MIB up 0.7%, IBEX 35 up 1.6%, AEX-Index up 1.1%, Swiss Market Index up 0.1%
Bonds: German 10-year-yield up 9bps at 0.02%, Italian 10-year-yield up 14bps at 1.55%, Spanish 10-year-yield up 13bps at 0.99%
Credit: iTraxx Main down 2.8bps at 74.6, iTraxx Crossover down 16.9bps at 362.2
FX: Euro spot down 0.13% at 1.1111, Dollar index up 0.08% at 97.49
Commodities: Brent crude up 4.4% at $109.6/bbl, copper up 1.2% at $10,181/MT, iron ore up 1.2% at $148.15/MT, gold down 1.3% at $1,920.21/oz

EUROPE EQUITIES

15 out of 20 Stoxx 600 sectors rise; travel & leisure sector has the biggest volume at 174% of its 30-day average; 386 Stoxx 600 members gain, 209 decline
Top Stoxx 600 outperformers include: Polymetal International +18.5%, Neste +14.3%, Galp Energia SGPS +10.6%, Weir Group PLC/The +10.4%, TotalEnergies +8.2%
Top Stoxx 600 underperformers include: Avanza Bank Holding -12.2%, Telefonaktiebolaget LM Ericsson -9.7%, Royal Unibrew -8.7%, BioMerieux -8.7%, E.ON -8.1%
For a daily wrap highlighting the biggest movers among EMEA stocks, click here
You want more news on this market? Click here for a curated First Word channel of actionable news from Bloomberg and select sources. It can be customized to your preferences by clicking into Actions on the toolbar or hitting the HELP