By Avinash P and Pranav Kashyap
March 5 (Reuters) – European shares pushed higher on Thursday, as the previous session’s rebound gathered steam, even as the Middle East war continued to cast a shadow and investors sifted through a slate of earnings.
The pan-European STOXX 600 traded 0.3% higher by 0949 GMT. It erased some early losses and built on Wednesday’s gain, which was the strongest in more than three months, as it tried to claw back sharp losses racked up earlier in the week.
Banks, the epicentre of the recent selloff, rose about 0.5%, while airlines were mixed, with only Air France up nearly 1%. Export-heavy luxury names lagged, while utilities, often traded as bond proxies, jumped 1%.
The day’s tentative optimism was unfolding against a grim geopolitical backdrop.
The U.S.-Israel war with Iran entered its sixth day with no quick resolution in sight. Tehran launched a fresh wave of strikes at Israel, and the U.S. Senate blocked a motion aimed at halting the U.S. air campaign.
“The price action that we see right now is jittery. The volatility is high,” said Ipek Ozkardeskaya, senior analyst at Swissquote Bank.
“Therefore, it’s better to take a step back. If we don’t have a clear and abrupt end to the conflict right now, we will continue to see this volatility extend into the next weeks.”
Europe remains heavily reliant on imported oil and LNG, and tighter supply conditions due to the war could push energy and transport costs higher.
That pressure is landing at an awkward moment for policymakers, with growth already tepid, and a renewed surge in oil risks reigniting inflation fears. Oil was up 3% on Thursday and over 15% for the week so far.
Traders braced for remarks from ECB President Christine Lagarde later in the day for signals on the policy path ahead.
In the meantime, ECB Vice President Luis de Guindos said the bank could adjust its stance if the conflict persists, while policymaker Francois Villeroy de Galhau said he saw no reason for raising rates.
Adding to that message, Morgan Stanley became the latest Wall Street firm to project the ECB will hold rates steady through 2026, pointing to the inflation risks stemming from the conflict.
In single stocks, defence names continued to climb on expectations of higher spending. Airbus rose 2.4%, one of the biggest lifts to the STOXX 600, after activist hedge fund TCI Fund Management lifted its stake to about 5% in the planemaker.
Rentokil Initial jumped 12.1% after the pest control firm reported a 4% rise in annual adjusted pretax profit.
German logistics group DHL dropped 3.4% after reporting a 1.3% decline in fourth-quarter operating profit, weighed down by its freight forwarding business.
(Reporting by Avinash P in Bengaluru; Editing by Sherry Jacob-Phillips and Harikrishnan Nair)
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