US and European stocks were on track for their best week since November 2020, wiping out almost all losses incurred since Russia’s invasion of Ukraine.
Wall Street’s benchmark S&P 500 share index, which traded flat on Friday, was on course to finish the week about 4.9 per cent higher.
Europe’s regional Stoxx 600 added 0.6 per cent, taking its weekly gain to 5 per cent and leaving it just a fraction below its closing level of February 23, the day before Russian president Vladimir Putin launched a full-scale incursion into Ukraine.
Stock markets rallied this week on suggestions Russia and Ukraine had made progress on a tentative peace plan, and a pledge by Liu He, China’s top economic official, for measures to boost the nation’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 was on track to end the week 8 per cent higher. Shares of the Dutch chipmaking equipment manufacturer ASML, a longtime investor favourite, gained almost 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, slipped 0.3 per cent on Friday to about $106 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”.
Source: Financial Times