European shares higher after Fed hike, eyes on Ukraine peace talks

LONDON: European stocks gained in choppy trading on Thursday, a day after the Federal Reserve’s widely anticipated US interest rate hike, as investors eyed Russia-Ukraine peace talks.

The pan-European STOXX 600 index rose 0.5%, paring March losses spurred by the Ukraine conflict.

Investors took in stride the long-expected start of a US monetary tightening. The Fed increased rates by a quarter percentage point, as expected, and telegraphed equivalent hikes at every meeting for the rest of the year.

“It is not totally unexpected what the Fed said in terms of further rate hikes. What is worrying for the market is the confirmation of quantitative tightening that will come sooner or later,” said Salvatore Bruno, head of investments at Generali Investments Partners.

Investors also ratcheted up bets of a rate hike by the European Central Bank and priced in a total increase of 50 basis points this year.

Commodity stocks led the gains in Europe, with the energy sector rising 2.2% as crude prices jumped 8% on expected supply shortages in coming weeks due to sanctions on Russia.

British oil-majors lifted UK’s FTSE 100, which rose 1.3%, while the Bank of England raised interest rates as expected and struck a less hawkish tone on further hikes.

Miners rose 0.7% as Shanghai copper and aluminium prices continued to benefit from hopes of more stimulus measures by top metals consumer China.

As the Ukraine war entered its fourth week, Russian-Ukrainian talks continued as Western officials said the two sides remained far apart.

“Any ceasefire would require a major climbdown from one side or the other, and with their respective positions still being miles apart, and Russia still targeting civilians, an imminent de-escalation doesn’t look likely at this point,” said Michael Hewson, chief market analyst at CMC Markets UK.

Germany’s Thyssenkrupp fell 9.4%, after suspending its 2021/22 forecast for free cash flow before mergers and acquisitions due to the Ukraine crisis, and said it was unclear if it would still be able to spin off its steel division.

British food-delivery company Deliveroo jumped 6.3% after saying it aimed to reach breakeven core earnings around two years’ time.

France’s water and waste management firm Veolia rose 2.8% after estimating net income would grow by more than a fifth this year.