Europe: Banks, automakers fuel strong comeback for shares

[BENGALURU] German shares vaulted almost 8 per cent to lead strong gains across European stocks markets on Wednesday, as investors picked up beaten-down stocks following a rout sparked by fears about the fallout from the Ukraine crisis.

Italian and French shares jumped around 7 per cent each, while the pan-European Stoxx 600 index rallied 4.7 per cent for its best session in two years.

The Stoxx 600 broke a four-day losing streak during which it lost about 7 per cent, hit by the threat of a Russian oil imports ban.

On Tuesday, German and Italian shares closed 20 per cent below their recent highs - a decline investors call a "bear market".

Hard-hit banks, automakers and travel and leisure stocks rose more than 7 per cent each.

News that Russia and Ukraine expressed willingness to talk helped sentiment and boosted recovery in stocks globally.

"The fact that Western governments seem to be carrying out an economic war against Russia, rather than military conflict, has helped the overall sentiment," said David Madden, market analyst at Equiti Capital.

The German DAX, which has suffered the most among regional indexes due to the companies' exposure to Russian energy supplies, marked its biggest percentage gain since March 2020.

"DAX is up as a mixture of bargain hunting and short covering," added Madden.

Euro zone banks rallied almost 10 per cent, but still remain down 13 per cent for the year amid uncertainty about the European Central Bank's policy tightening plans as well as an economic hit from the Ukraine crisis.

The ECB is set to meet on Thursday, with chief Christine Lagarde likely to prove that a lid can be kept on euro-area inflation, which has already leapt to a bigger-than-expected 5.8 per cent - the highest figure in the bloc's two decades.

On Tuesday, stock markets fell in volatile trade and oil prices jumped to US$127 per barrel after the United States and Britain moved to ban Russian oil imports, raising fears of global stagflation.

Oil prices retreated on Wednesday. Britain's commodity-heavy FTSE 100 rose 3.2 per cent, the least among European peers as energy and mining stocks fell after a strong rally.

Adidas jumped 13.6 per cent after the German sportswear company said it was expecting a sales recovery in its China business but warned of a hit of up to 250 million euros (S$371 million) from halting business in Russia.

German logistics company Deutsche Post climbed 12.5 per cent after reporting a 65 per cent increase in 2021 operating profit.

Lenders UniCredit and BNP Paribas climbed around 10 per cent each, helped by a broad-based rally, as the banks unveiled their exposure to Russia. REUTERS