By Peter Nurse
Investing.com - European stock markets traded higher Monday on raised hopes for a diplomatic solution to the Ukraine war, but investors remain wary as fighting continues, a number of central banks hold meetings this week and Covid returns to China.
By 4:10 AM ET (0810 GMT), the DAX in Germany traded 2.7% higher, the CAC 40 in France traded 1.1% higher and the U.K.’s FTSE 100 gained 0.3%.
The next round of the talks on the war in Ukraine between the two principals takes place Monday, but the noises emerging from the last session were reasonably upbeat.
U.S. Deputy Secretary of State Wendy R. Sherman said on Sunday that Russia was showing signs it might be willing to have substantive negotiations, while Ukrainian negotiator Mykhailo Podolyak said Russia was "beginning to talk constructively."
That said, despite the optimistic tone, the fighting rages on near Kyiv, the Ukrainian capital, following Sunday’s bombardment by Russia of a large training base near the border with NATO member Poland on Sunday.
U.S. officials claimed over the weekend that Russia had asked China for military assistance, potentially heightening the diplomatic tensions significantly. The U.S. and China plan to hold their first high-level, in-person talks since Moscow’s invasion later Monday.
Another factor prompting caution was China’s decision to place the over 17 million residents of Shenzhen, the country’s technology hub, into lockdown for at least a week after Covid cases soared once more.
This has the potential to weigh heavily on economic growth in China, as well as further disrupt global supply chains.
Elsewhere, the Federal Reserve is widely expected to announce its first interest rate hike since 2018 on Wednesday as policymakers try to balance the twin threats of inflation, which is running at a four-decade high, and economic uncertainty arising from the war in Ukraine.
The Bank of England is also expected to hike rates again this week, while central banks in Japan, Turkey, and Brazil will also hold meetings.
Back in Europe, Eurozone finance ministers are set to meet later Monday to discuss potential support for the region’s economy, given the risks to growth in the wake of Russia's invasion of Ukraine just as it starts to recover from the pandemic.
In corporate news, Telecom Italia (MI:TLIT) stock soared 8.8% after Italy’s biggest phone group said it would start formal talks with KKR, almost four months after the private equity giant’s approach.
Deutsche Bank (DE:DBKGn) rose 5.6% after the German lender stated that it would wind down its business in Russia, changing its stance after criticism over its ongoing ties.
Oil prices weakened Monday, extending last week’s decline on hopes for progress in the diplomatic efforts to end the Ukraine war as well as the Chinese Covid lockdown.
By 4:10 AM ET, U.S. crude futures traded 4% lower at $104.93 a barrel, while the Brent contract fell 3.3% to $108.98.
Both contracts have surged since Russia's Feb. 24 invasion of Ukraine, with both hitting their highest levels since 2008 last week. However, U.S. crude still recorded a weekly drop of 5.7% last week, while Brent last week was down 4.8%.
Additionally, gold futures fell 0.9% to $1,966.90/oz, while EUR/USD traded 0.5% higher at 1.0964.