European stocks jump after Russia says some troops returning to base

European equities jumped after Russia said it had begun pulling some troops back to their bases following the completion of military drills.

The Stoxx Europe 600 share index, which fell almost 2 per cent on Monday, added 0.9 per cent in early dealings on Tuesday. London’s FTSE 100 rose 0.9 per cent, and Germany’s Xetra Dax gained 1.3 per cent.

Russia’s rouble also gained on the news, recently rallying 1.1 per cent against the dollar, while Ukraine’s currency, the hryvnia, advanced 1 per cent.

The gains came after Russia’s defence ministry said units of Russia’s southern and western military units were heading back to base following the completion of exercises and manoeuvres.

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"If [Russian president Vladimir Putin] has really blinked this would be huge win for Biden, Zelensky and the west," said Tim Ash at BlueBay Asset Management, referring to the leaders of the US and Ukraine.

Sergei Lavrov, Russia's foreign minister, had on Monday said Moscow was prepared to keep talking to the west, expressing optimism for a "way forward" in negotiations. But the White House later damped hopes of Moscow seeking a diplomatic route out of the Ukraine crisis, warning that Russia's military was still ramping up plans to invade its neighbour.

Futures gain

US stock-index futures also gained on Tuesday after the statement from Russia’s defence ministry. Futures contracts tracking the S&P 500 gauge added 1 per cent while those tracking the technology-heavy Nasdaq 100 rose 1.4 per cent.

Brent crude, the oil benchmark, fell 1.6 per cent to $94.97 a barrel after rallying as high as $96.78 on Monday, its strongest level in seven years.

Haven assets also fell in price, with the dollar index down 0.3 per cent. The yield on Germany’s 10-year bund, which moves inversely to the price of the security, rose 0.03 percentage points to just over 0.3 per cent.

The yield on the 10-year treasury note rose 0.05 percentage points to 2.04 per cent.

Global stocks whipsawed on Monday as investors reacted to uncertain news flow about Russia’s intentions for Ukraine and considered the prospects of sanctions on Russian oil and metals exports that may exacerbate surging inflation and supply chain glitches related to the Covid-19 pandemic.

"The Russia-Ukraine situation is coming at an inopportune time when markets were already fragile," said Olivier Marciot, cross-asset fund manager at Unigestion, referring to expectations the US Federal Reserve would raise interest rates up to seven times this year after inflation hit a 40-year high.

“Markets are therefore being very reactive to any incremental piece of news that comes out.” – Copyright The Financial Times Limited 2022