LONDON: European stocks closed at a more than seven-year high Thursday, with investors latching onto upbeat developments about major risks from Russia and Greece that have dogged the eurozone for months.
The Stoxx Europe 600 SXXP, +0.75% rose 0.7% to 374.83, its highest close since December 2007, according to FactSet data, gaining traction after Russian President Vladimir Putin said European leaders reached an agreement for a cease-fire in Ukraine, starting Sunday. The deal, which calls for both sides to pull back heavy weapons, follows 10 months of fighting between Ukrainian troops and pro-Russian separatists.
Russia’s Micex XX: MCX equity index swung out of the red to close Thursday’s session higher by 2.6% at 1,810.11. The move pushed the Micex to a year-to-date gain of 29%. In 2014, the index dropped 7.2% as Russia grappled with sanctions related to the fighting in Ukraine, as well as the tumble in oil prices.
While news of a cease-fire “is clearly very welcome, a number of crucial points of disagreement remain, including over the redrawing of boundaries,” said Kevin Ferriter, market economist at Capital Economics, in a note Thursday. “As long as there is still a large gap between the Ukrainian authorities and the rebels on these issues, a lasting peace is unlikely and investors will remain wary of the implications of continued conflict.”
There are signs of progress for Russian equities, Ferriter said, but “each must be taken with a pinch of salt” as it appears a rebound in commodity prices will be modest and the Russian economy looks set to enter a deep recession this year. “In this context, it seems unlikely that equities will stage a sustained recovery.”
The Russian ruble gained against the dollar, with the greenback USDRUB, -0.29% buying 65.635 rubles compared with more than 66 rubles ahead of the cease-fire news.
