European shares climb 1% to one-month highs on Middle East de-escalation hopes

EUROPEAN shares closed at their highest level in over a month on Tuesday, with investors welcoming signs of a resumption of Middle East peace talks, even as LVMH and other companies warned of fallout from the war.

The pan-European index closed 1 per cent higher at 619.95 points, while other regional bourses also rose. Germany’s DAX, Spain’s IBEX 35 and France’s CAC 40 added over 1 per cent each.

Signs of diplomatic talks were sufficient to trigger a rebound in stocks, while oil prices retreated below US$100 a barrel.

Meanwhile, the International Monetary Fund cut Germany’s growth forecasts for this year and next, in its largest downgrade among big euro zone economies.

European dependence on oil imports has left it vulnerable, with US equities outperforming European ones since the war began.

“Investors meanwhile seem to have already decided that the European economy and its companies will fare worse than the US in face of the war and higher energy prices,” Kristina Hooper, chief market strategist at Man Group, said in a note.

Industrials and euro zone banks boosted the index, rising 1.6 per cent and 2.3 per cent, respectively.

Tech shares moved higher, with Dutch semiconductor stocks BE Semiconductor gaining 5.3 per cent while ASML and ASMI were up 2 per cent and 1.4 per cent, respectively. ASML will report its quarterly results on Wednesday.

Meanwhile, the energy index lost 1.5 per cent with heavyweights Shell and BP off about 2.5 per cent each.

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Imperial Brands dropped 4.8 per cent after the maker of Davidoff cigarettes said the impact of the Middle Eastern conflict could disrupt second-half performance.

French luxury brand LVMH said the Iran war shaved at least 1 per cent from group sales in the last quarter due to lower spending in the Gulf. Shares ended flat after paring early losses.

“I don’t think it’s a surprise that luxury goods are taking an impact from the Middle East conflict as the sector is overly exposed to the region, but for the vast majority of European companies I do think the war impact will be short-lived,” said Craig Cameron, portfolio manager for Templeton Global Investments at Franklin Templeton.

Among other stocks, Intertek Group surged 12.8 per cent after the product testing firm said it was exploring the potential separation of its energy/infrastructure and testing/assurance businesses.

Chemicals group Sika jumped 7.9 per cent after it reported a narrower-than-feared organic decline in the first quarter. REUTERS