Key facts
- European shares rose on Tuesday, with the STOXX 600 index closing 0.5% higher.
- The gains were driven by broad sector increases and easing euro zone bond yields.
- Danish biotech firm Genmab climbed 4.4% after positive study results for a lymphoma treatment developed with AbbVie.
- Oil prices fell 2% on Tuesday.
- Markets are now pricing in one European Central Bank rate hike by March, with an 80% chance of a second, down from expectations of at least three.
European shares advanced on Tuesday, with the pan-European STOXX 600 index closing 0.5% higher. The rise was supported by broad sector gains and a decrease in euro zone bond yields, which had recently spiked due to fiscal and inflation concerns. The index has now risen for three consecutive sessions.
Travel and leisure stocks led the gains, rising 1.4%, while heavyweight banks also saw an increase of 1.1% as risk appetite improved. Oil prices fell by 2% as increased crude exports from the Middle East eased supply worries.
Danish biotech firm Genmab reached a three-year high, climbing 4.4%, following positive late-stage study results for a combination treatment for lymphoma developed with US drugmaker AbbVie. The broader healthcare index rose 0.6%, though this was partially offset by a 5.5% drop in Zealand Pharma shares.
Euro zone bond yields eased from multi-decade highs reached the previous week. The spread between French and German 10-year yields narrowed, indicating a potential reassessment by investors of France's recent risk premium surge. Spanish Prime Minister Pedro Sanchez's call for a snap election on Monday added to regional political uncertainty.
Laura Cooper, global investment strategist and head of macro credit at Nuveen, noted that renewed fiscal and political concerns in France were compounding pressures from the energy shock, but suggested the rapid market moves indicated position-unwinding rather than a fundamental shift. She also stated that signs of contagion, such as sustained foreign selling of French debt or increased reliance of French banks on the central bank, had not yet materialized.
The recent bond market volatility has led investors to scale back their expectations for European Central Bank interest rate hikes. Markets now anticipate one hike by the bank's March meeting, with an 80% chance of a second, a reduction from earlier expectations of at least three hikes. Persistently high rates increase borrowing costs for companies and individuals, and raise governments' interest burdens.
In other market movements, Italian company Technoprobe gained 2.8% after J.P.Morgan initiated coverage with an 'overweight' rating. Spanish property developer Neinor Homes saw its shares rise 5% after it updated its outlook and announced a planned dividend payout of €200 million to €250 million for 2028.