By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- European stocks were on the upswing
Monday, as Russia indicated it will work to ease tensions with
Ukraine.
The Stoxx Europe 600 climbed 1.2% to 328.91, cutting into last
week's 2.1% slide.
Gains overnight in Asia and on Wall Street on Friday set the
tone for European trade following reports that Russia was ending
military drills on Ukraine's border.
Mining and industrial stocks were higher in European trade
Monday, with iron ore producer Rio Tinto up nearly 2% and Germany's
Siemens gaining 1.7%.
Russia's conflict with Ukraine has been a source of pressure for
European equities recently, particularly as Western countries
issued trading restrictions against Russia as they worked to force
Russia to stop aiding pro-Russian separatists in Ukraine.
Russia's MICEX index climbed 1.9%. Shares of Sberbank claimed a
4.2% increase, VTB Bank rose 3.6% and Gazprom picked up 1.4%. Index
producer MSCI late Friday said it will keep Sberbank and VTB in its
MSCI Russia Index until further notice after consulting with the
investment community.
Indexes
Germany's DAX 30 index bounced up 1.8% following last week's
drop of 2.2%. Investors have been concerned about the impact of
Russian sanctions on the German economy. The DAX last week fell
into correction mode, losing 10% of its value after reaching an
all-time high in June.
J.P. Morgan Cazenove said Monday the DAX is "now the cheapest
market in Europe," at 11.9 times price-to-earnings, and is a
"beneficiary of a falling euro and of a pickup in Chinese and U.S.
activity".
In Paris, the CAC 40 was up 1% and in London, the U.K. FTSE 100
was pushed higher by 0.8%.
Russian growth
Russian President Vladimir Putin last week hit back with its own
sanctions, banning imports of food and other items, on Western
countries that restricted its products.
While there have been violent reactions in the markets on
geopolitical worries and signs of weakening growth in the euro
zone, "[w]e do not see the ingredients for a broad sell-off in
global financial markets," said Carmine Grigoli, chief investment
strategist at Mizuho Securities, in a note Monday.
"For now, the Russian economy will bear the brunt of escalating
tensions with the West, as the combination of broadening sanctions
and capital flight is expected to push the economy into recession,"
he said. "U.S. trade with Russia is miniscule, so the repercussions
from the sanctions should be negligible. Eurozone economic growth
could be dampened by sanctions."
Russian economic growth slowed to 0.8% in the second quarter
versus first-quarter growth of 0.9%.
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