European stocks rise after days of choppy trading

European equities rose on Friday as a sell-off driven by the war in Ukraine and central banks tightening monetary policy gave way to bargain hunting.

The regional Stoxx Europe 600 added 1.2 per cent, with all sectors in positive territory, though the share gauge remains more than a tenth lower in the year to date. Germany’s Xetra Dax added 2 per cent.

In the US, the benchmark S&P 500 index traded flat, remaining about a tenth lower for the year. The technology-focused Nasdaq Composite, meanwhile, slipped 0.4 per cent.

“What we have seen so far is an indiscriminate sell-off, particularly of European equities but also globally,” said Francesco Sandrini, global head of multi-asset at Amundi. “Extremely defensive sectors that were not affected by the crisis have been sold heavily, so the rebound is no surprise.”

Investors pulled $13.5bn out of European equities in the week to March 9, EPFR figures collated by Bank of America showed, the largest weekly outflow since the data series began in 2000.

The moves followed falls on Thursday after the European Central Bank announced it would reduce its bond-buying scheme earlier than initially planned, causing a sell-off of eurozone government debt.

US consumer inflation surged in February to its highest level in 40 years, reinforcing expectations that the country’s Federal Reserve would raise interest rates steadily from this month after pinning them close to zero since March 2020.

European sovereign bonds were steadier after wide moves in the previous session. The yield on Germany’s 10-year Bund traded flat at 0.27 per cent.

On Thursday the gap between Italy’s benchmark borrowing costs and Germany’s, as measured by the income yields on the nations’ 10-year bonds, had widened by the most since April 2020 as traders priced in less ECB support for weaker eurozone economies.

Clouding the global outlook, analysts at Goldman Sachs downgraded their US economic growth forecast for 2022 to 1.75 per cent on Thursday evening, from 2 per cent previously. Jan Hatzius, chief economist at Goldman, said the downgrade was made “to reflect higher oil prices and other drags on growth related to the war in Ukraine”.

Marija Veitmane, strategist at State Street, said she expected US stock indices to fare relatively better than those in Europe while the war continued, however.

“Every market is affected but obviously geographically closer neighbours are going to be affected much more,” she said, citing Europe’s reliance on Russian oil and gas and Ukrainian commodities.

Brent crude oil, which has swung in recent days as investors assessed the possibility of producer group Opec raising output to compensate for US sanctions against Russia, added 0.9 per cent to about $110 a barrel after EU leaders said at a summit they were debating further moves against Moscow.

In Asia, Hong Kong’s Hang Seng index shed 1.6 per cent and Japan’s Topix fell 1.7 per cent. Australia’s S&P/ASX 200 dropped 0.9 per cent, while China’s CSI 300 was up 0.3 per cent.

The Hang Seng Tech index fell as much as 8.9 per cent on Friday — later closing down 4.3 per cent — after the Nasdaq Golden Dragon China closed down 10 per cent at its lowest level since 2016.

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