European stock markets closed in positive territory on Tuesday, contrasting with a mixed performance on US exchanges where the Dow Jones Industrial Average gained 0.4% while the Nasdaq Composite fell 0.99%. Paris led the gains, with the CAC 40 up 1.22%, followed by Milan’s FTSE MIB (+0.86%), while Madrid’s IBEX 35 and Frankfurt’s DAX both advanced 0.5%. London’s FTSE 100 posted a more modest increase of 0.4%.
The closely watched yield spread between Italian and German 10-year government bonds narrowed to just under 80 basis points. The annual yield on the Italian BTP fell by 9 basis points to 3.54%, while the yield on the German Bund dropped 12 basis points to 2.75%. The French 10-year yield also declined, down 15 basis points to 3.43%, resulting in a 68-point spread over Germany and an 11.6-point premium over Italy.
In commodities, West Texas Intermediate crude oil fell 1.06% to $62.75 a barrel. Natural gas pared losses to trade down 0.45% at 31.13 points, while gold declined 0.6% to $3,324.9 an ounce. The US dollar weakened to 85.67 cents against the euro, while holding steady at 0.74 against the British pound.
Sectors were influenced by reports of a potential end to hostilities between Russia and Ukraine and the subsequent lifting of sanctions on Moscow. This spurred significant buying in luxury goods and automotive stocks, while defense companies sold off sharply. Notable gainers included Burberry (+5%), Puma (+4.68%), Moncler (+4.3%), Pandora (+3.94%), and Swatch (+3.8%). Auto manufacturers Porsche (+3.5%), Renault (+3%), and Stellantis (+2.9%) also attracted buyers. Conversely, defense contractors Leonardo (-9.5%), Hensoldt (-8.8%), Saab (-7.15%), and Rheinmetall (-5.15%) experienced heavy losses.
Spirits producers were also in focus, with Campari (+3.25%), Diageo (+3.05%), and Pernod Ricard (+3%) all posting strong gains. The banking sector saw broad-based strength, led by Commerzbank (+2.44%), Intesa Sanpaolo (+2.08%), Monte dei Paschi (+1.75%), Mediobanca (+1.5%), UniCredit (+1.1%), Société Générale (+0.95%), and Popolare di Sondrio (+0.9%). Banco BPM (+0.5%) and BPER Banca (+0.35%) saw more cautious gains.
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