De-escalation hopes put European risk appetite back in focus

Fidelity European Trust

European equities moved sharply higher in early trading as investors responded to a more constructive geopolitical backdrop and a fresh set of manufacturing data that suggested conditions in parts of the region may be stabilising. The move was broad enough to reach beyond a simple rebound trade, with cyclical sectors and economically sensitive names leading the advance.

The shift in tone followed signals from both the United States and Iran that pointed to a possible end to current hostilities. That change mattered because markets had been carrying a heavier geopolitical risk premium, particularly in sectors vulnerable to energy disruption, weaker confidence and tighter financial conditions. As that pressure began to ease, investors reassessed near-term downside scenarios and moved back into assets that had been discounted on conflict-related concerns.

At the same time, the final March manufacturing purchasing managers’ readings for Germany, Italy and the euro area came in ahead of market expectations. That added an economic layer to what might otherwise have been treated as a purely sentiment-driven recovery.

The advance across the main indices reflected that broader reassessment. The pan-European STOXX 600 rose 2.1 per cent to 595.6 points. In the major national markets, the FTSE 100 gained 1.6 per cent to 10,340, France’s CAC 40 added 2 per cent to 7,971, Germany’s DAX rose 2.2 per cent to 23,180, Spain’s IBEX 35 climbed 2.9 per cent to 17,546 and Italy’s FTSE MIB also advanced 2.9 per cent to 45,601.

Fidelity European Trust PLC (LON:FEV) aims to be the cornerstone long-term investment of choice for those seeking European exposure across market cycles.

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