Europe: Stocks close at five-month highs as investors monitor progress on Ukraine

[BENGALURU] European shares closed at their highest level in more than five months on Tuesday (Aug 19) as investors assessed the chances of an end of the war in Ukraine, following Monday’s talks in Washington between US, Ukrainian and European leaders.

The pan-European Stoxx 600 index closed 0.7 per cent up. Most major regional bourses also traded firmer.

Markets were buoyed by hopes of more talks to resolve Russia’s war in Ukraine after US President Donald Trump promised security guarantees for Kyiv at a summit with Ukrainian and a group of European leaders, though there was little clarity on the specifics.

He said that arrangements for a trilateral summit between the US, Russia and Ukraine were being made.

On Tuesday, Trump said that he hoped Putin would move forward on ending the war but conceded the Kremlin leader may not want to make a deal.

European defence stocks fell 2.6 per cent, marking their worst day in over a month, and were the biggest laggards on the Stoxx 600 index.

Shares in Italy’s Leonardo fell 10.2 per cent, the most on the index. Hensoldt and Renk Group fell 9.5 per cent and 8.3 per cent, respectively, while Rheinmetall was down 4.9 per cent.

“The rest of the market is edging cautiously higher… that really reflects what we think about the prospect of a peace deal – it’s likely in some shape or form,” said Nick Saunders, CEO of stock trading platform Webull UK.

“What form that takes is going to be difficult to determine.”

Consumer discretionary sectors led broader gains with automobiles and food and beverage stocks up 2.4 per cent and 1.6 per cent, respectively.

Luxury stocks surged on a boost from Moncler , up 4.9 per cent, and Burberry rising 5.1 per cent.

Meanwhile, the latest forecasts showed a dip in the outlook for European corporate health, marking a change of direction after several weeks of improvement.

However, of the 259 Stoxx 600 companies that have reported second-quarter earnings so far, almost 53 per cent have exceeded analyst estimates, LSEG I/B/E/S data showed.

The Stoxx 600 has gained almost 10 per cent this year, driven by hopes of higher spending in the bloc, a shift to European assets in the first half of 2025 and rising expectations of a US interest rate cut.

However, Saunders did not expect continued capital flow into Europe as global trade war fears had somewhat subsided.

The Federal Reserve’s annual Jackson Hole symposium will also be in focus this week. Investors will scrutinise any clues from chair Jerome Powell and others on monetary policy, even as a September cut remains priced in.

Among other stocks, JD Sports gained 6.9 per cent after Deutsche Bank raised the British sportswear retailer’s target price to 100 pence from 85 pence. REUTERS