By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets partly rebounded
after a sharp prior-day selloff on Tuesday after tensions between
Russia and Ukraine appeared to ease as Russian troops reportedly
were called back to their bases and President Vladimir Putin
stressed he wouldn't use military force yet.
The Stoxx Europe 600 index rallied 2.1% to close at 337.15,
partly recovering from a 2.3% slide on Monday.
The sharp decline on Monday came after the crisis in Ukraine
intensified over the weekend, as Russian President Vladimir Putin
got parliamentary approval to launch a miliary intervention on the
country's southwestern neighbor.
The move was condemned by western powers and U.S. President
Barack Obama warned Russia could face costly sanctions unless it
ends its occupation of Ukraine's Crimean region. On a visit to Kiev
on Tuesday, U.S. Secretary of State John Kerry called the Russian
moves in Crimea an "invasion" and urged Russia to talk to the
Ukrainian government. Additionally, president of the European
Council, Herman Van Rompuy, has scheduled an extraordinary meeting
for EU leaders on Thursday to discuss the situation in the
country.
Tensions appeared to ease on Tuesday, however, after Russian
troops sent on surprise military exercises in western and central
Russia reportedly were ordered to return to their bases. The drills
began last Wednesday, and some of them were near the Ukraine
border, which triggered some concerns that Russia was building up
for a massive incursion.
Putin said in a televised press conference that he sees "no need
yet" to send troops to Ukraine, but that the use of military forces
remains an option in an "extreme case." The Russian President also
stressed that Ukrainian parliament's move to oust former leader
Viktor Yanukovych was "unconstitutional" and that the ousted
president is still the legitimate head of Ukraine. Read: Putin:
U.S. treats foreigners like lab rats
The combination of calling back troops and Putin's comments took
some heat out of the crisis, spurring optimism in the stock market,
with both European indexes and U.S. stocks rising.
Russia's MICEX index jumped 5.3% to 1,356.54, after tanking 11%
on Monday.
Peter Garnry, head of equity strategy at Saxo Bank, said in a
note that political and economic risks shouldn't deter investors
from moving into Russian equities and that the country's stocks are
looking "ridiculously cheap" at the moment.
"This song [of staying out of Russian equities] has been playing
out for years now and while there is some truth to that, equities
can become so cheap that you have to act despite a crisis and
negative news headlines," he said.
Garnry pointed to two reasons for buying instead of selling.
First, a war in Ukraine is likely to become too expensive for the
parties involved and a diplomatic solution can therefore be
expected. And second, Russia has a positive economic outlook with
estimates for real GDP growth of 2% and 2.5% in 2014 and 2015
respectively. The best way to gain exposure to the "oversold"
Russian equities is trough the db x-trackers MSCI Russia Capped
Index UCITS ETF , rather than by selecting individual stocks, he
said.
Among other country-specific indexes in Europe, France's CAC 40
index gained 2.5% to 4,395.90, while Germany's DAX 30 index put on
2.5% to 9,589.15. The U.K.'s FTSE 100 index rose 1.7% to
6,823.77.
Shares of Ashtead Group PLC jumped 13% in London after the
equipment-rental company reported a 54% rise in third-quarter
pretax profit.
Shares of Glencore Xstrata PLC (GLCNF) put on 1.7% after the
miner said it swung to a full-year loss, but that its closely
watched adjusted earnings before interest and taxes rose 34%.
Banks were also rising after being hit hard in Monday's market
rout. Shares of Société Générale SA advanced 3.4% in Paris,
Commerzbank AG rose 4.9% in Frankfurt and Royal Bank of Scotland
Group PLC (RBS) climbed 2.5% in London.
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