European stock markets saw a significant rally on Thursday, buoyed by comments from former US President Donald Trump signaling the possibility of immediate peace talks with Russia to end the war in Ukraine. This announcement spurred optimism across the continent, helping drive major indices higher while also contributing to a decline in gas prices.
Germany’s DAX index closed up 2.1%, while France’s CAC 40 gained 1.5%, as investors bet that a ceasefire could rejuvenate European businesses and foster economic growth after three years of war-related stagnation.
“This war has been the primary drag on Europe over the last few years. A lot of investors pulled back when it started,” said Barclays strategist Emmanuel Cau. “A ceasefire could make Europe investable again.”
The Stoxx Europe 600 index, which tracks the performance of 600 companies across the region, rose 1.1%, reaching a fresh high. The euro also strengthened, climbing 0.5% to $1.043, a gain that followed Trump’s peace talks announcement.
Impact on Energy Prices and Markets
The Russian invasion of Ukraine, which began in 2022, has exacerbated global inflation by driving up commodity and energy prices. This, in turn, created significant market uncertainty. On Thursday, natural gas prices, which had surged by approximately 120% over the past year due to the war, saw a sharp decline. The European benchmark TTF fell by 8.7%.
Goldman Sachs analysts estimate that if Russian gas flows to Western Europe through Ukraine return to pre-war levels, gas prices could drop by as much as 50%.
Russian assets also benefitted from the news, with the ruble strengthening by 5%, reaching 89.5 per dollar. JPMorgan’s Emerging Europe, Middle East, and Africa Securities trust, which holds several Russian stocks and frozen cash in Moscow accounts, surged 18.8% in London.
Sector-Specific Gains
Several sectors directly benefiting from lower energy prices saw strong gains. Airlines, chemicals, and automakers all experienced notable increases. Wizz Air soared 6%, while Lufthansa gained 2.8%. Car manufacturer Stellantis rose by 4.5%, and BASF, the world’s largest chemicals producer, climbed 5.3%.
However, energy companies that had previously profited from high oil and gas prices faced losses. Europe’s largest gas producer, Equinor, dropped 1.9%, after falling as much as 6% earlier in the day. TotalEnergies also saw a 0.5% dip.
Optimism for Rebuilding and Future Growth
Construction and infrastructure stocks, particularly those poised to help rebuild Ukraine after the conflict ends, saw strong growth. French industrial group Legrand surged 9%, while steel producer ArcelorMittal rose 3.2%.
Daniel Morris, chief market strategist at BNP Paribas Asset Management, pointed out that “the broader impact of lower energy prices and reduced uncertainty will be positive for European equities.”
Thursday’s gains extend the rally in European stocks this year, which has been driven by Trump’s more conciliatory approach to tariffs, expectations of lower interest rates in the European Union compared to the US, and rising hopes for an end to the war in Ukraine.
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