LONDON, Feb 7 — European shares rose today after five straight weeks of declines, as gains in mining stocks and positive earnings reports outweighed worries of a looming policy tightening cycle and geopolitical tensions.
The pan-European STOXX 600 ticked up 0.2 per cent after losing 0.7 per cent last week.
The STOXX 600 has dipped 5 per cent so far in 2022, weighed down by a 15 per cent decline in tech stocks, as hawkish central banks amid broadening inflationary pressures, geopolitical concerns and energy supply fears dominate market sentiment.
“(The European Central Bank) could, after all, decide to lift rates in 2022. Prior remarks by (ECB President Christine) Lagarde and her colleagues highlighted no lift-offs this year, but now that door is open,” said Charalambos Pissouros, head of research at JFD Group.
Expectations of higher rates hurt equities as this means higher borrowing costs and lower present values, especially for high-growth firms which are usually valued by discounting future cash flows, Pissouros said.
Klaas Knot, the Dutch Central Bank president and a member of the ECB’s governing council, said on Sunday he expected the ECB to raise rates in the fourth quarter of 2022.
Today, Germany’s two-year government bond yield rose to its highest in nearly seven years.
Meanwhile, German industrial production dipped in December as supply chain bottlenecks and a drop in construction hampered Europe’s largest economy at the end of last year.
Yesterday, White House national security adviser Jake Sullivan warned that Russian President Vladimir Putin could order an attack on Ukraine within days or weeks, as Washington and its European allies continued efforts to offer Putin a diplomatic way out of the crisis.
“Bearing in mind the rising geopolitical tensions in Ukraine, we cannot rule out volatile market swings,” Pissouros said.
Miners rose 1.4 per cent after aluminium prices in China leapt 3 per cent, bolstered by supply concerns and expectations of strong demand, while Chinese steel and iron ore futures jumped after the state planner called for faster infrastructure construction.
Aurubis AG, Europe’s largest copper producer, firmed 3.6 per cent after confirming an 85 per cent rise in quarterly profit and reiterating higher full-year earnings estimates on solid metal prices and output.
French automotive group Faurecia advanced 2.5 per cent after saying it would aim for sales of above €33 billion (RM157 billion) in 2025, at an operating profit margin of more than 8.5 per cent. — Reuters
