Commodities boost fails to keep European shares buoyant

European shares turned lower on Thursday as concerns over the impact of mounting sanctions against Russia weighed on sentiment even as a relentless rally in commodity prices boosted mining and oil stocks.

The Europe-wide STOXX 600 index slipped 0.3%, reversing from modest opening gains.

Asian shares had steadied earlier, taking cues from a Wall Street bounce overnight after Federal Reserve Chairman Jerome Powell’s comments assuaged concerns about aggressive interest rate hikes.

Europe’s mining index rallied 3.4% as aluminium prices climbed to an all-time high and nickel surged to its highest in 11 years on worries that sanctions against Moscow over its invasion of Ukraine would hit metal supplies. [MET/L]

The oil and gas sector jumped 0.8% to a fresh two-year peak as Brent rose above $118 a barrel. [O/R]

The overall mood, however, remained cautious as investors weighed the impact of the crisis on inflation and economic growth, particularly in Europe where several countries are reliant on Russian gas supplies.

“The uncertainty triggered by a war in Europe, along with spiking energy prices (especially natural gas), are negative for European growth momentum,” BCA analysts said in a note. “The Ukraine shock has likely delayed any ECB rate hikes to 2023.”

Banks edged up 0.4% after suffering sharp falls earlier this week due to concerns about their exposure to Russia, as well as receding expectations of rate hikes from the European Central Bank.

French bank Societe Generale (PA:SOGN) said it could cope if stripped of its business in Russia, where it has more than 18 billion euros ($19.97 billion) of exposure, in one of the starkest indications yet by a global bank of the potential impact of the crisis.

Its shares rose 0.7% after sinking to a near one-year low in the previous session.

The London Stock Exchange Group (LON:LSEG) gained 4.6% after it said applying financial sanctions on Russia would have only a minor impact on its business.

Germany’s Lufthansa fell 6.2% after the airline said it could not provide a detailed outlook for 2022 due to the war in Ukraine and the pandemic.

Meanwhile, a survey conducted before the Ukraine conflict showed business activity across the euro zone accelerated sharply last month as demand soared, particularly in the bloc’s dominant services industry.