European stocks inch up as investors assess bond moves

AIB and Bank of Ireland both end session up 2 per cent at €1.98 and €5.80

European shares gained on Monday, led by automakers and defensive sectors, as hopes for a peace deal between Russia and Ukraine boosted sentiment, while a drop in crude prices pressured oil stocks.

The pan-European Stoxx 600 index firmed 0.1 per cent. The benchmark is about 8 per cent away from its all-time high hit in early January.

"Bond markets[are] being seen as somewhat toxic for investors at the moment, and high rates of inflation make cash toxic too, so there is little choice but to invest in equities for now – and working in favour is that dividends ought to grow over time with inflation," said Stuart Cole, head macro economist at Equiti Capital.

European automakers and cyclical sectors including utilities and construction stocks led gains. The sell-off in euro-zone bond markets showed no sign of slowing, with traders pricing in as many as four European Central Bank interest rate hikes within a year.

Dublin

Hopes of a peace deal boosted in Ukraine and the prospect of incoming interest rate rises boosted AIB and Bank of Ireland, which both ended the session up 2 per cent at €1.98 and €5.80.

The more optimistic sentiment and a check on high-flying oil prices helped Ryanair to increase by 2.6 per cent to €13.53.

The airline advised Dublin passengers to arrive three hours earlier because of staff shortages at Dublin Airport. Hotel chain Dalata was up 3 per cent at €3.89 on the back of more positive news concerning the return of tourists in the aftermath of Covid-19.

Irish Ferries owner Irish Continental Group, meanwhile, rose 2.65 per cent to €3.87 amid the ongoing fallout from P&O's decision to fire 800 mainly UK staff.

Europe

German chemicals giant BASF gained 1.6 per cent after HSBC upgraded the stock to "buy", saying "resilient demand" will likely help first-quarter earnings. French utility EDF slipped 0.3 per cent after saying it would have to announce new delays and cost overruns for its Hinkley Point C nuclear plant project due to the Ukraine conflict, supply-chain disruption and inflation, among other reasons. Carlsberg rose 3.5 per cent after the Danish brewer announced it would exit Russia along with brewing giant Heineken, joining an exodus of western companies as pressure grows on Moscow following its invasion of Ukraine.

London

London's FTSE 100 ended lower on Monday, as gains in consumer staples on the back of weaker pound were countered by weaker energy stocks as oil prices fell on China demand worries.

After rising as much as 0.75 per cent, the blue-chip FTSE 100 closed 0.1 per cent lower, with oil majors BP and Shell down nearly 2.5 per cent each. Oil prices dropped more than $6 as fears grew over weaker fuel demand in China after financial hub Shanghai's lockdown to curb a surge in Covid-19 infections.

Among individual stocks, Barclays declined 4.1 per cent after the lender disclosed around a £450 million (€538 million) loss on mishandled bond trades and said this meant it would have to delay a share buyback. Aero-engine maker Rolls-Royce tumbled 10.7 per cent to the bottom of the FTSE 100 after a near 20 per cent surge on Friday.

New York

The S&P 500 was trading largely flat on Monday as gains in Tesla were offset by declines in bank and energy shares, ahead of the first face-to-face peace talks between Ukraine and Russia in more than two weeks. The electric-car maker jumped 5.3 per cent after saying that it will seek investor approval to increase its number of shares to enable a stock split.

Oil majors Exxon and Chevron fell 2.8 per cent and 1.8 per cent, respectively, after crude prices tumbled more 7 per cent as fears over weaker fuel demand in China grew amid a surge in Covid-19 infections.

Seven of the 11 major S&P sectors declined. Strong economic data and gains in beaten-down growth stocks have powered Wall Street's main indexes in the recent days, despite the Russia-Ukraine conflict and hawkish comments from Federal Reserve policymakers. – Additional reporting: Reuters

Eoin Burke-Kennedy

Eoin Burke-Kennedy

Eoin Burke-Kennedy is Economics Correspondent of The Irish Times

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