European stocks recover 3% after decline in previous session by Ukraine

Europe’s main stock index rallied on Friday, escaping nine-month lows and with banks leading a broad rally as investors looked for deals after falling sharply the previous session on the Russian invasion of Ukraine.

Hopes in diplomacy helped confidence after the Kremlin said the Russian president Vladimir Putin is ready to send a delegation to Minsk to negotiate with representatives of Ukraine, after missiles hit Kyiv as the Russian forces advanced.

The rally helped recover from all of Thursday’s heavy losses, but it was not enough for the benchmark pan-European index to STOX 600 closed the week higher as geopolitical tension has caused investors to flee riskier assets.

The index chained its second week of decline, with a decrease of 1.6%, and has lost about 8% since its maximum in January.

“We don’t think now is the time to be completely bearish on equities; confidence is already weak and at least some of the risks have been discounted”, said Mark Haefele, chief investment officer at UBS Global Wealth Management.

Banks rose 4.3%, recovering half of their previous session’s decline, but braced for the impact of likely new Western sanctions on Russia, which could cut off Russian banks’ access to European financial markets.

Confidence remained fragile heading into the weekend as evidenced by defensive buying. Industrial stocks, utilities, health care and consumer staples were the biggest drivers of the STOXX 600.

“While uncertainty persists, we expect (European equities) to remain volatile and defensive”HSBC analysts said in a note.

With information from Reuters