Bumper BP profits lift European stocks, euro stalled by cautious Lagarde

By Marc Jones

LONDON (Reuters) - Bumper profits from oil giant BP helped lift European stocks on Tuesday, while the euro was pegged back as the head of the European Central Bank, Christine Lagarde, tried to rein in interest rate hike expectations.

Oil and mining shares were among the biggest gainers on the pan-European STOXX 600, after FTSE-listed BP reported a $12.8 billion annual profit, its highest in eight years, boosted by soaring gas and oil prices. [.EU]

It worked out a staggering $24,353 a minute - more than someone on minimum wages in major economies would earn in a year - and helped offset what had been a groggy session in Asia after more than 30 new Chinese firms had hit by Washington's export warnings. [.SS]

Currency and bond market traders meanwhile were still focused squarely on which central banks will hike their interest rates the fastest and furthest this year following the rapid rise in global inflation.

"Central banks globally have all engaged in a hawkish pivot," said BlueBay Asset Management's David Riley. "As their tolerance for higher inflation persistently is less than previously signalled we are shifting to a regime where there will be more macro volatility."

Comments from ECB President Lagarde on Monday that there was currently no need for major monetary policy tightening weakened the euro weaken for a second consecutive day and nudged down the bond yields - a proxy for borrowing costs - for high-debt countries, such as Italy, Greece and Spain.

Italian government bonds outperformed, with the 10-year yield falling 2.5 bps to 1.78% and the "spread", or premium investors demand to buy a bond, between Italian and German 10-year yields narrowed to 155 bps.

Wall Street futures were pointing to a rebound there later too, after a fall on Monday when Meta, the firm formerly known as Facebook, had suffered another 5% whacking. [.N]

CHOPPY CHINA

Asia's session had been volatile overnight too. MSCI's broadest index of Asia-Pacific shares ended flat overall but blue chip Chinese stocks dropped to a 19-month low after big tech firms' heavy losses and U.S. export warnings on 33 new Chinese firms. [.SS] [.HK]

The prospect of global rates rising had pushed Japanese government bond yields up too, while those on benchmark 10-year U.S. Treasuries briefly touched 1.96%.

Back in the currency market Russia's rouble hit a four-week high after marathon talks between President Vladimir Putin and his French counterpart Emmanuel Macron have kept up hopes that war in Ukraine will be avoided.

It helped oil come off Monday's seven-year high of $94 on Monday.

It was trading lower at $92 also ahead of the resumption of indirect talks in Vienna later between the United States and Iran, which may revive a nuclear agreement that could eventually allow more oil exports from the OPEC producer.

A deal could allow over 1 million barrels per day of Iranian oil, equal to over 1% of global supply, back onto the market, though that was still a distant possibility.

Brent crude was down 73 cents, or 0.8%, at $91.96 a barrel. U.S. West Texas Intermediate crude fell 52 cents, or 0.6%, at $90.80.

Eight rounds of indirect talks between Tehran and Washington since April have yet to result in an agreement on resuming the 2015 nuclear deal. Differences remain about the speed and scope of lifting sanctions on Tehran.

"Exports could resume swiftly if a nuclear deal is reached," said Tamas Varga of broker PVM. "But it is a big 'if'."

 

(Additional reporting by Sujata Rao and Alex Lawler in London and Anshuman Daga in Singapore; Editing by Tomasz Janowski)