FRANKFURT: Europe’s STOXX 600 jumped over 2 percent on Wednesday in a broad-based rally as reports of a possible peace deal between Washington and Tehran boosted risk appetite and sent oil prices sharply lower, while upbeat company earnings added to the optimism.
The pan-European STOXX 600 closed up 2.2 percent at 623.25 points, to its strongest level since April 17.
Major regional bourses mirrored the rally. France’s CAC 40 led the pack with a 2.9 percent jump while Italy’s benchmark gained 2.4 percent, hovering near its highest level since 2000.
Iran said it was reviewing a new US proposal, following reports that the two parties were closing in on a one-page memorandum to end the war in the Gulf.
Crude slipped nearly 7 percent with energy the only major STOXX sector trading down 2.5 percent. Lower oil prices helped the oil price sensitive travel sector advance 5.8 percent, leading sector-wise gains on the index.
“Signs of progress in the deal is in some ways more positive for Europe than it is for the US, just because it’s a sensitive region”, said Kiran Ganesh, multi-asset strategist at UBS Global Wealth Management.
“Once this Iran issue has passed, then the underlying picture looks really strong for corporate earnings”, Ganesh added.
Easing crude prices could temper concerns of energy price driven inflation, a crucial factor that hangs as a major drag on European equities which are still below their pre-war levels, while the S&P 500 has hit multiple fresh peaks ever since the outset of the Iran war.
Money markets are currently pricing in a 67.6 percent chance that the European Central Bank hikes rate at its June meeting, down from a nearly 85 percent chance on Tuesday, according to LSEG data.
Banks and industrials were up 3.8 percent and 3.2 percent, respectively, and the biggest boosts on the European benchmark on Wednesday.
Defence shares added 4.7 percent. Italy’s Leonardo gained 5 percent after reporting higher first-quarter earnings, while Norway’s Kongsberg also jumped 5 percent after its order intake more than doubled for the quarter.
Demant surged 13.3 percent and marked its biggest one-day gain since October 2008 after the Danish hearing aids maker beat quarterly sales growth estimates.
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