- Banks lead sectoral gains in Europe
- FTSE 100 outperforms STOXX 600
- Finland's Fortum gains on move to sell Oslo heating business
March 22 (Reuters) - European shares rose on Tuesday, boosted by gains in banks on prospect of aggressive rate hikes following hawkish comments from U.S. Federal Reserve Chair Jerome Powell, while energy stocks extended a rally on the back of higher oil prices.
The pan-European STOXX 600 gained 0.5% after a lacklustre start to the week. The European banks sector index climbed 2.1%, while oil & gas stocks advanced 0.3%.
Other cyclical sectors such as insurers and autos, preferred bets for a rising rates scenario, rose more than 1.5%.
Powell said on Monday the central bank must move "expeditiously" to raise rates and possibly "more aggressively" to battle red-hot inflation, just as markets digested last week's 25-basis-point rate hike.
"Fed communications highlight a singular focus on containing inflation right now," said Mark Haefele, chief investment officer at UBS Global Wealth Management.
"Responding to a question, Powell said 'nothing' would prevent the Fed from delivering a 50 bps hike if appropriate."
Money markets are now pricing an around 50 basis points of rate hikes by the European Central Bank (ECB) by the end of the year. IRPR
The ECB said earlier this month that it would not be in a hurry to raise rates but many conservative policymakers have argued that a rate hike, the first such move in over a decade, should remain on the table as inflation is not as temporary as the central bank once expected.
Russia's invasion of Ukraine has triggered a rally in commodities including oil and industrial metals on concerns about supply disruptions, with crude prices also bouncing after some European Union members discussed a potential oil embargo on Moscow.
London's oil-exporter heavy FTSE 100 index led gains among its continental peers for the second straight day, rising 0.6%. The STOXX 600 index has fallen more than 6% so far this year, while the FTSE 100 has outperformed with gains of 1.2% during the same period.
Finnish utility Fortum rose 0.8% as it agreed to sell its 50% stake in Fortum Oslo Varme for 10 billion Norwegian crowns ($1.14 billion).
Europe's largest online restaurant food ordering service Just Eat Takeaway.com gained 3.1% on a partnership with McDonald's Corp to expand delivery.
Italian defence group Leonardo was 1.5% higher after its U.S. unit DRS agreed to sell its satellite communications business GES to SES for $450 million.
Finland's Nokian Tyres Plc said it would continue production in Russia to retain control of its local factory, at a time when many companies are halting operations in protest. Shares of the company rose 2.8%.
Reporting by Shreyashi Sanyal in Bengaluru; Editing by Sriraj Kalluvila
Source: Reuters