European stocks wiped out losses incurred since Russia’s invasion of Ukraine, posting their strongest week since November 2020, with US equities poised to follow suit.
The regional Stoxx Europe 600 closed 0.9 per cent higher on Friday, taking its weekly gain to 5.4 per cent. Earlier in March, the index had dropped more than a tenth below its closing level on February 23, the day before Russian president Vladimir Putin launched a full-scale incursion into Ukraine.
On Wall Street, the S&P 500 gauge added 0.4 per cent and was also on course to finish the week more than 5 per cent higher.
Stock markets rallied this week on suggestions Moscow and Kyiv had made progress on a tentative peace plan and a pledge from Beijing for measures to boost China’s flagging economy. Investors also said a knee-jerk sell-off caused by Russia’s invasion was fading, with money managers now taking advantage of bargain valuations in some sectors.
“We were seeing panic outflows but now investors are having second thoughts,” said Bastien Drut, chief thematic macro strategist at CPR Asset Management in Paris. “The markets are starting to trade on fundamentals again.”
In Europe, the Stoxx banks sub-index ended the week more than 8 per cent higher. Shares of the Dutch chipmaking equipment manufacturer ASML, a longtime investor favourite, gained more than 10 per cent this week after dropping 9 per cent in the week to March 4. In the US, drugmaker Moderna’s stock has risen more than 25 per cent in the past seven days.
Analysts at Bank of America said on Friday that after investors pulled $20bn from global equity funds over the previous two weeks, the rate of outflows came at a “much lower pace” this week.
Up to $230bn is also expected to flow from bonds to equities in the coming weeks as big investors including US pension plans rebuild stock market positions, in a bid to maintain their long-term asset allocation strategies.
Friday’s equity market moves came as US president Joe Biden prepared to warn his Chinese counterpart, Xi Jinping, of retaliation if Beijing actively supported Russia in Ukraine. Antony Blinken, US secretary of state, also cautioned there were no signs Putin was “prepared to stop” Russia’s invasion of its neighbour.
“The actions that we’re seeing Russia take every single day, virtually every minute of every day, are in total contrast to any serious diplomatic effort to end the war,” Blinken said on Thursday.
Mary Nicola, multi-asset portfolio manager at PineBridge Investments, said: “The one thing we can expect is continued volatility.”
“The comments from China had been supportive for the market,” she added. “The situation around Ukraine and Russia remains very fluid and that continues to be the main drag on market sentiment.”
In Asia, Hong Kong’s benchmark Hang Seng index edged 0.4 per cent lower and the CSI 300 index of Shanghai- and Shenzhen-listed stocks gained 0.7 per cent, recovering from heavy falls earlier in the session.
Brent crude, the international oil benchmark, added 0.5 per cent on Friday to $107.13 a barrel.
Both Brent and the US crude benchmark had closed more than 8 per cent higher on Thursday following a warning from the International Energy Agency that a fall in Russian crude supply to the global market threatened to become the “biggest supply crisis in decades”.
The price of spot gold fell 0.8 per cent to $1,928 an ounce, having risen to as much as $2,074 last week, just shy of its all-time high.
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