Europe: Stocks mark cautious gains on commodities boost

[BENGALURU] European stocks reversed earlier falls to close higher on Wednesday as surging commodity prices lifted energy and mining shares on fear of supply constraints due to crippling sanctions against Russia over its invasion of Ukraine.

The pan-European Stoxx 600 index ended the day 0.9 per cent higher. The oil & gas index jumped 4.1 per cent as Brent crude topped US$110 per barrel for the first time since 2014.

Miners gained 2.3 per cent as prices of metals including copper and aluminium surged, supported by growing fears of supply disruptions.

"Equity markets have suffered greatly in the past few sessions, and that has presented buying opportunities, but the bulls who entered the fold today are far from aggressive," said David Madden, market analyst at Equiti Capital.

The Stoxx 600 had slumped more than 2 per cent on Tuesday and is down about 8 per cent this year, amid worries over the global economic impact of Western sanctions on Russia, especially surging energy prices fanning already high inflation.

Global stock markets took heart from Federal Reserve Chair Jerome Powell signaling the central bank would start raising rates this month despite uncertainties stemming from the Ukraine crisis.

Euro zone banks gained 1.4 per cent after dropping to their lowest level in nearly 11-months.

Powell's comments and a Bank of Canada rate hike helped banks as "the market has been reassured that central bank policy remains focussed on battling inflation, meaning interest rates will continue to be raised," said Stuart Cole, head macro economist for Equiti Capital.

Data on Wednesday showed euro zone inflation soared to another record high last month, intensifying problems for the European Central Bank, which must convey a sense of calm amid war-related market turmoil but also respond to mounting price pressures.

Defensive names, which had seen some buying amid the hit to risk sentiment, declined on the day with utilities down 1.7 per cent.

Carmakers lost 1.6 per cent as they struggled to obtain crucial wire harnesses as the Russian attack has shuttered suppliers in western Ukraine, forcing them to curtail production.

Volkswagen and BMW lost more than 2 pre cent each.

Ericsson slumped 9.7 per cent after the Swedish telecom gear maker said it had been informed that disclosures it made to the US Department of Justice about an internal investigation into conduct in Iraq were insufficient.

Finnish refiner Neste jumped 14.3 per cent after a joint venture deal with Marathon Petroleum Corporation, as brokers welcome added production capacity. REUTERS