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LONDON: European shares hit more than a five-week high on Tuesday after a report that Russian gas flows to Europe via the Nord Stream 1 pipeline are seen restarting on time allayed some concerns about an energy supply crunch on the continent.

The sources told Reuters the pipeline, which accounts for more than a third of Russian natural gas exports to the European Union, was expected to resume operation on Thursday, but at less than its capacity of some 160 million cubic metres per day.

Earlier on Tuesday, the Wall Street Journal reported, citing European Budget Commissioner Johannes Hahn, that the European Commision did not expect the pipeline to restart after the scheduled maintenance.

“The energy crisis is one of the biggest worries for Europe’s investors and citizens. Having a stable source of energy as opposed to an unstable source is certainly a meaningful piece of news,” said Steve Sosnick, chief strategist at Interactive Brokers.

The pan-European STOXX 600 index closed 1.4% up at its highest level since June 10, logging its third consecutive day of gains.

It fell as much as 0.7% earlier in the session on worries about a hawkish European Central Bank and slowing economic growth.

Sources told Reuters ECB policymakers are considering raising interest rates by a bigger-than-expected 50 basis points at their meeting on Thursday to tame record-high inflation.

The central bank had earlier signalled it would hike rates by 25 bps this month, its first since 2011.

Worries about a hit to economic growth due to rapid tightening in financial conditions has dragged the STOXX 600 down by 13.2% this year.

With COVID-19 lockdowns disrupting economic activity in China, the Russia-Ukraine war hurting energy supplies to Europe and a weaker Euro, the outlook looks bleak.

“It’s a tough place for the ECB to be — it needs to materially tighten policy to fight inflation but at the same time needs a loose policy to support the dire fiscal positions in some of its member countries,” said Stuart Cole, a senior macro strategist at Equiti Capital.

Gains were broad-based on Tuesday, with automobile sector leading the pack with a 3.1% jump, followed by 2.9% rise in banks.

Germany’s DAX surged 2.7%, the most among the regional indexes.

Shares of EDF jumped 14.7% after the French government offered to pay 9.7 billion euros ($9.85 billion) to take full control of the power company in a buyout deal.

Telenor fell 5.5% after the Norwegian telecoms operator lowered its EBITDA guidance for the year.

Investors are focused on the second-quarter earnings season, with Sosnick saying, “for European companies, in their outlooks it will be interesting to see if multi-nationals find favorable cfavourableranslations and that weaker euro is helping their results.”

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