European shares recover after Trump’s comments spark de-escalation hopes

EUROPEAN shares rebounded on Monday, snapping a three-day losing streak after US President Donald Trump said he would postpone any strikes on Iranian power plants and energy infrastructure following “productive” conversations with Tehran.

The pan-European Stoxx 600 rose nearly 0.6 per cent to 576.78 points after dropping as much as 2.5 per cent earlier in the session.

“Each day without resolution exerts a slow downward pull on markets, yet the potential for a sharp squeeze higher remains very real if there is even a hint of a credible ceasefire,” said John Wyn Evans, head of market analysis at Rathbones.

The mid-session reversal in equities shows how sensitive risk sentiment remains to the US-Israel war against Iran, now in its fourth week, which has eclipsed most other concerns for investors.

Trump said Washington and Teheran had “productive” conversations for “total resolution of hostilities.” However, Iran’s foreign ministry spokesperson denied any communication with the US, keeping traders on edge.

Index recovers but risks remain

Regional bourses recovered, with Frankfurt’s DAX and Spain’s IBEX up over 1 per cent each. Miners, financials and travel and leisure rose 2.6 per cent, 2.6 per cent and 2.5 per cent, respectively.

A 9 per cent drop in Brent futures weighed on energy shares, which lost 1.7 per cent and were the biggest drag on the index.

Energy-price-sensitive airlines also reversed losses with Air France and Lufthansa climbing 3.9 per cent and 3.4 per cent, respectively.

SEE ALSO

US stocks: Wall Street indexes rise after Trump postpones strikes on Iran’s power plants

“This is the same type of thing that happened after Liberation Day,” said Robert Pavlik, senior portfolio manager at Dakota Wealth, drawing a parallel to the volatile markets nearly a year ago as investors grappled with the lack of clarity on US tariffs.

The continent is particularly vulnerable to energy price swings, considering its reliance on imports via the Strait of Hormuz -- a conduit for one-fifth of the global oil supply that has largely been shut since the war began.

Despite the strong start to the week, the Stoxx 600 remains on the cusp of a correction, having fallen about 9 per cent from its record high close in February.

An index is said to have confirmed a correction if it closes 10 per cent below a recent record high close.

Rate hike concerns eased

Hopes of a de-escalation prompted markets to scale back their bets on rate hikes by the European Central Bank, but brokerages have cautioned that the impact on inflation and economic growth could be felt for months.

Spain proposed fiscal measures to counter the economic impact of higher energy costs.

Among individual movers, Telecom Italia added 4.7 per cent after postal service Poste Italiane announced it was launching a cash-and-share offer to buy the former phone monopoly for 10.8 billion euros (S$15.9 billion). Poste Italiane declined 6.9 per cent.

German company Delivery Hero advanced 7.9 per cent after selling its food delivery business in Taiwan to Grab Holdings for US$600 million.

Danish jeweller Pandora’s shares jumped 9.2 per cent on lower precious metal prices. REUTERS