(Bloomberg) -- European stocks rose to another record high, boosted by the prospect of a ceasefire in Ukraine and the likelihood of increased spending on defense.
The Stoxx 600 Index was 0.3% higher at the close in London, with banks and industrials leading the advance. The blue-chip Euro Stoxx 50 also hit an all-time peak, bringing its year-to-date gains to 13%.
The US and Russia agreed to more talks on resolving the war in Ukraine and finding ways to work together on other international issues, though they set no date for a summit meeting between President Donald Trump and Russia’s Vladimir Putin. Meanwhile European governments are working on a new package to ramp up defense spending and support Kyiv.
“Market sentiment improved after initial talks between the US and Russia were said to have been productive,” Panmure Liberum strategist Joachim Klement said.
He sees the boost as unwarranted, however, noting “myriad obstacles to overcome that will ultimately require the acceptance by Ukraine.”
European equities are outperforming US peers this year, partly as cheaper valuations entice investors. Citigroup Inc. strategists said US net long positions had halved in just over three months, while European positioning moved from net short to net long.
“On balance, we see this change with caution and have doubts that European markets can make further gains without significant positive catalysts,” a Citi team led by Chris Montagu wrote in a note.
The banking subindex was the day’s top performer, hitting new 16-year highs. While the sector has notched eight weeks of gains, the latest leg higher was driven by a Bloomberg News report that some of the European Union’s top central bankers have asked its regulatory arm to simplify rules.
Among individual stocks, InterContinental Hotels Group Plc dropped 4.7% after analysts flagged that higher interest expense and capital expenditure guidance could weigh on the hotelier’s earnings expectations. Capgemini SE shares fell 10% after the French company gave a lower-than-expected revenue growth target for this year.
For more on equity markets:
- Banking on European Buybacks Is a Winning Strategy: Taking Stock
- M&A Watch Europe: Prudential, Eni, BHP, Point72, Anglo, Assura
- Shein Valuation Pressured Amid Growing List of Risks: ECM Watch
- US Stock Futures Rise
- Barbarians at the Gate: The London Rush
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--With assistance from Sagarika Jaisinghani.
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