Europe Shares Higher As Ukraine Tensions Ease; Russia Stocks Climb 5%

European stocks held solid gains on Tuesday, after comments from Russian President Vladimir Putin, who stated that any use of force in Ukraine would only be a last resort.

Putin speaks

The Euro Stoxx 600 Index was higher in afternoon trade by just under 2 percent.

Putin gave a muted response when asked about any potential conflict in Ukraine at a Moscow press conference on Tuesday morning. He said there was “no need yet” to exercise its authority and he was not considering the annexation of Crimea . He also directly addressed Monday’s heavy selling in stock markets saying that the move would only be “temporary.”

The pan-European benchmark showed gains of 1.7 percent for the day, bouncing back from Monday’s declines which saw the DAX lose around 3 percent. Russia’s MICEX Index led the move, trading higher by around 5 percent after losing nearly $60 billion in market capitalization on Monday.

U.S. stocks jumped on Tuesday, with the Dow and S&P 500 bouncing back after their worst hit in a month.

Christopher Granville, co-founder and managing director of the Russia team at Trusted Sources, told CNBC: “Why is it that markets are rebounding today? I think because financial markets always respond to uncertainty. Where might this end? Might the Russian army go on from the Crimea to invade eastern Ukraine or possibly the whole of Ukraine? And clearly the signals are now that is not the aim.”

Putin’s press conference came after reports that the Russian president had ordered troops that took part in military exercises this week to return to base.

Heavily weighted Russian stocks claw backed Monday’s losses with MegaFonhigher by 4.5 percent, Gazprom climbing 8.7 percent and VTB Bank adding 6 percent. Ukrainian stocks also gained with Kiev’s UAX Index rising by 8 percent.

On the Euro Stoxx 600, stocks with heavy exposure to Russia like Carlsberg,Societe Generale and Austria’s Raiffeisen Bank all traded higher after talk of economic sanctions for Russia had curbed sentiment in the previous session.

All major bourses in Europe and all sectors showed buying on Tuesday morning, however gains were capped in the oil and gas sector with continued fears over Russian and Ukrainian pipelines to Europe.

Ishaq Siddiqi, a market strategist at spread better ETX Capital, believes that the modest rebound might not last. “Market sentiment remains fragile and anxious at best with traders transfixed with developments in the Ukraine,” he said in morning note.

Draghi warns on inflation

On the data front, a Markit purchasing manager’s index (PMI) for the construction industry in the U.K. came in at 62.6 on Tuesday morning. The figure for February was lower than market expectations and lower than a previous figure of 64.6. Euro zone producer prices also came in worse-than-expected. The year-on-year figure saw a fall of 1.4 percent, according to the data, against predictions for a slide of 1.3 percent.

Meanwhile, Mario Draghi, the president of the European Central Bank (ECB), told European lawmakers on Monday that inflation in the euro zone is “way below” the bank’s target. He added that the longer it stays at such low levels, the harder it will be to get it back up to its goal with a risked of it becoming entrenched at low levels.

Some analysts saw this as a sign of a rate cut with the ECB’s Governing Council set to meet this week. However, Chris Weston, a trader at IG Markets believes this is still quite far off.

“Draghi actually balanced out his comment on inflation by saying the economy is moving in the right direction and saying the Ukraine situation will have a limited economic impact on the region,” he said in a morning note on Tuesday.

Glencore shares rise

In other stocks news, mining giant Glencore Xstrataswung to a net loss in 2013 but reported earnings that were better than forecast; shares were higher by 1.9 percent.

Germany’s energy firm RWE posted its first annual loss in six decades on Tuesday caused by nearly $7 billion in writedowns. However. shares rose 1.3 percent with analysts saying that the results were better than expected.

Source: CNBC