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European stock markets rose on Thursday while energy prices fell after US President Donald Trump said talks with Russia would begin “immediately” to end the war in Ukraine.
Germany’s Dax rose 1.4 per cent and France’s Cac 40 was up 1.2 per cent in morning trading, as investors bet that a ceasefire could boost European companies after a three-year long war that has curbed growth across the continent.
An end to the Ukraine war could provide a boost to European equities that have been “suffering” for years, said Charles de Boissezon, global head of equities at Société Générale. “Investors were very underinvested in Europe . . . [but] the sentiment is warming up,” he said.
The Stoxx Europe 600 index gained 0.7 per cent — touching a fresh high — while the euro gained 0.1 per cent to $1.039, extending a rise triggered by Trump’s comments on Wednesday afternoon.
Russia’s full-scale invasion of Ukraine in 2022 exacerbated a global surge in inflation, as commodity and energy prices soared. It also sent western markets lower on fears of supply chain disruption.
Brent crude, the global benchmark, dropped 1.1 per cent to $74.32 a barrel while its US counterpart, West Texas Intermediate, shed 1.5 per cent to $70.47 a barrel.
Natural gas prices, which surged when the war began and are up about 120 per cent over the past year, fell. TTF, the European benchmark, extended their losses to trade down 9 per cent.
If flows of Russian gas to western Europe through Ukraine returned to prewar levels, however, gas prices could fall as much as 50 per cent from its current level, according to Goldman Sachs.
Russian assets also benefited, with the rouble gaining 3 per cent to 91.2 per dollar.
JPMorgan’s Emerging Europe, Middle East and Africa Securities, an investment trust that tracks several Russian stocks and cash frozen in a Moscow account, gained more than 23 per cent in London.
The trust is trading at a premium of more than 200 per cent to its assets despite management ascribing in effect no value to its Russian holdings since the invasion.
Airline, chemicals and auto companies, which would benefit from lower energy prices, rose. Wizz Air was up 5.2 per cent and Lufthansa rose 3.6 per cent, while carmaker Stellantis was up 5.3 per cent. BASF, the world’s largest chemicals group, gained 4.7 per cent.
But energy companies, many of which made large profits in recent years because of high oil and gas prices, fell. Equinor, Europe’s largest gas producer, dropped 1.7 per cent, while TotalEnergies fell 0.7 per cent.
London’s FTSE 100 index, which counts oil companies BP and Shell among its largest constituents, lost 0.6 per cent.
Construction and infrastructure stocks — companies that could help rebuild Ukraine after the war — gained. French industrial group Legrand rose 6.4 per cent, while steel producer ArcelorMittal rose 2.6 per cent.
“In a broader context the impact of lower energy prices and the reduction in uncertainty will be positive for European equities,” said Daniel Morris, chief market strategist at BNP Paribas Asset Management.
Thursday’s gains extend a rally this year in European equities, driven by Trump’s softer stance on tariffs, prospects of lower interest rates in the bloc compared with the US and hopes of an end to the war.
In recent days, investors’ other fears — such as inflation or Trump’s tariffs — have been counterbalanced by “bigger optimism on an end to the Ukraine war”, according to Emmanuel Cau, an analyst at Barclays.
