European stocks have wiped out losses incurred since Russia invaded Ukraine last month, with large indices on both sides of the Atlantic registering their biggest weekly advances since November 2020.
The regional Stoxx Europe 600 closed 0.9 per cent higher on Friday, lifting its gain this week to 5.4 per cent. The advance in recent days has helped erase losses tallied since the close of trading on February 23, the day before Russian president Vladimir Putin launched a full-scale incursion into Ukraine, that had eclipsed 10 per cent.
In the US, the benchmark S&P 500 gained 1.2 per cent while the tech-heavy Nasdaq Composite rose 2 per cent. For the week, the two indices increased 6.2 and 8.2 per cent, respectively.
Stock markets have 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.”
Friday’s equity market moves came as US president Joe Biden warned 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,” he said on Thursday.
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.
But the delicacy of the situation in Ukraine still has some investors feeling skittish.
“The one thing we can expect is continued volatility,” said Mary Nicola, multi-asset portfolio manager at PineBridge Investments.
“The comments from China had been supportive for the market. The situation around Ukraine and Russia remains very fluid and that continues to be the main drag on market sentiment,” she added.
The yield on the benchmark 10-year Treasury, which rises when prices fall, fell 0.03 percentage points to 2.14 per cent.
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, settled 1.2 per cent higher on Friday at $107.93 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 more than 1 per cent to $1,921 a troy ounce.