European shares recover after Trump’s comments spark de-escalation hopes

FRANKFURT: European shares rebounded on Monday, snapping a three-day losing streak after US President Donald Trump said he would postpone any strikes on Iranian power plants and energy infrastructure following “productive” conversations with Tehran.

The pan-European STOXX 600 rose nearly 0.6 percent to 576.78 points after dropping as much as 2.5 percent earlier in the session.

“Each day without resolution exerts a slow downward pull on markets, yet the potential for a sharp squeeze higher remains very real if there is even a hint of a credible ceasefire,” said John Wyn Evans, head of market analysis at Rathbones.

The mid-session reversal in equities shows how sensitive risk sentiment remains to the US-Israel war against Iran, now in its fourth week, which has eclipsed most other concerns for investors.

Trump said Washington and Tehran had “productive” conversations for “total resolution of hostilities.” However, Iran’s foreign ministry spokesperson denied any communication with the US, keeping traders on edge.

Regional bourses recovered, with Frankfurt’s DAX and Spain’s IBEX up over 1 percent each. Miners, financials and travel and leisure rose 2.6 percent, 2.6 percent and 2.5 percent, respectively.

A 9 percent drop in Brent futures weighed on energy shares, which lost 1.7 percent and were the biggest drag on the index.

Energy-price-sensitive airlines also reversed losses with Air France and Lufthansa climbing 3.9 percent and 3.4 percent, respectively.

“This is the same type of thing that happened after Liberation Day,” said Robert Pavlik, senior portfolio manager at Dakota Wealth, drawing a parallel to the volatile markets nearly a year ago as investors grappled with the lack of clarity on US tariffs.

The continent is particularly vulnerable to energy price swings, considering its reliance on imports via the Strait of Hormuz — a conduit for one-fifth of the global oil supply that has largely been shut since the war began.

Despite the strong start to the week, the STOXX 600remains on the cusp of a correction, having fallen about 9 percent from its record high close in February.

An index is said to have confirmed a correction if it closes 10 percent below a recent record high close.

Hopes of a de-escalation prompted markets to scale back their bets on rate hikes by the European Central Bank, but brokerages have cautioned that the impact on inflation and economic growth could be felt for months.

Spain proposed fiscal measures to counter the economic impact of higher energy costs.

Among individual movers, Telecom Italia added 4.7 percent after postal service Poste Italiane announced it was launching a cash-and-share offer to buy the former phone monopoly for 10.8 billion euros (USD12.5 billion). Poste Italiane declined 6.9 percent.

German company Delivery Hero advanced 7.9 percent after selling its food delivery business in Taiwan to Grab Holdings for USD600 million.

Danish jeweller Pandora’s shares jumped 9.2 percent on lower precious metal prices.