Europe close: Stocks extend rally after peace talks confirmed

European shares extended their rally on Wednesday after it was confirmed that Turkey will host peace talks between Ukraine and Russia, with gold miner Polymetal soaring by more than 69%.

As well, overnight, Ukrainian President Volodymyr Zelensky said that he had cooled regarding his country joining NATO and was open to talks and compromise on Crimea and the breakaway republics of Donetsk and Luhansk.

Indices of some of the countries most exposed to the conflict zone rebounded by the most. So while the pan-European Stoxx 600 index was up 4.68% at 434.45, Germany's DAX gained almost 8% to 13,847.93 and the FTSE Mib added 6.94% to 23,889.49.

Autos&Parts and Travel&Leisure issues outperformed on the Stoxx 600, with their respective sector indices rising by 9.5% and 8.26%, respectively.

Oil&Gas and Basic Resources saw some profit-taking, while the euro caught a bid and crude oil futures slipped.

Nevertheless, analysts were understandably cautious and wary.

For Credit Suisse equity strategists, the consensus for European and Russian GDP growth was still too rosy as negative feedback loops from the Ukraine crisis were being underestimated.

Indeed, they believed that it was possible that Russian GDP would crater by over 20% and that European GDP growth would be nearer to 1.0%.

"I'd be surprised if [the rally is] sustained for any significant period of time unless we see actual progress towards a ceasefire and Russian exit," was Oanda senior market analyst, Craig Erlam's, take on matters.

Michael Hewson, chief market analyst at CMC Markets UK, was a tad more positive, highlighting to clients comments from Russia's foreign ministry to the effect that Moscow would rather reach its goals through talks.

"This appears to have been construed as an increased willingness on the part of Russia to want to expedite an end to hostilities, given the unexpected high rate of losses currently being experienced on their side.

"Russia also said they didn’t want the overthrow of the Ukrainian government, or to take over the rest of the country, which does appear to be a shift from its previous intention to install a puppet regime."

In equity news, Adidas shares jumped as the German sportswear company’s earnings were well received. The company said it expects a sales recovery in its China business but warned of up to €250m hit from halting business in Russia.

Polymetal International shares surged by nearly 70% after the Anglo-Russian miner said that all of its operations in Russia and Kazakhstan have continued undisrupted, and said targeted sanctions against it are unlikely.

Belgian automobile distribution company D’Ieteren Group fell 11% after its full-year earnings report.

German logistics company Deutsche Post climbed 11% after reporting a 65% increase in 2021 operating profit.

Shares in Asia-focused insurer Prudential rose as the company reported a rise in earnings driven by new business.

East Europe focused budget carrier Wizz Air was up 16% on optimism around the peace talks.

Russian steelmaker Evraz shot higher after saying it had not been affected by international sanctions imposed on Russia.

Asia-focused insurer Prudential was also among the gainers as it reported a rise in annual operating profit driven by new business amid the Covid pandemic. Adjusted operating profit increased 16% to $3.23bn and beat the consensus of $3.19bn.

Legal & General was up after it posted a jump in 2021 profit and lifted its dividend as it benefited from a post-pandemic economic recovery and an easing of restrictions.