European stock markets traded higher Monday on raised hopes for a diplomatic solution to the Ukraine war, but investors remain wary as fighting continues, a number of central banks hold meetings this week and Covid returns to China.
By 4:10 AM ET (0810 GMT), the DAX in Germany traded 2.7% higher, the CAC 40 in France traded 1.1% higher and the U.K.’s FTSE 100 gained 0.3%.
The next round of the talks on the war in Ukraine between the two principals takes place Monday, but the noises emerging from the last session were reasonably upbeat.
U.S. Deputy Secretary of State Wendy R. Sherman said on Sunday that Russia was showing signs it might be willing to have substantive negotiations, while Ukrainian negotiator Mykhailo Podolyak said Russia was “beginning to talk constructively.”
That said, despite the optimistic tone, the fighting rages on near Kyiv, the Ukrainian capital, following Sunday’s bombardment by Russia of a large training base near the border with NATO member Poland on Sunday.
U.S. officials claimed over the weekend that Russia had asked China for military assistance, potentially heightening the diplomatic tensions significantly. The U.S. and China plan to hold their first high-level, in-person talks since Moscow’s invasion later Monday.
Another factor prompting caution was China’s decision to place the over 17 million residents of Shenzhen, the country’s technology hub, into lockdown for at least a week after Covid cases soared once more.
This has the potential to weigh heavily on economic growth in China, as well as further disrupt global supply chains.
Elsewhere, the Federal Reserve is widely expected to announce its first interest rate hike since 2018 on Wednesday as policymakers try to balance the twin threats of inflation, which is running at a four-decade high, and economic uncertainty arising from the war in Ukraine.
The FTSE MIB fell by 1.95% to 23,509.20. In the cash markets, the DAX Germany rose by 2.89% to 14,022.65. CAC 40 in France rose by 1.87% to 6,374.37 while the FTSE 100 in the U.K. was down by 0.39% to 7,184.35 ,at the time of writing.