European stocks rally after shock from Russia announcement, ahead of Fed rate decision

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European stocks closed higher on Wednesday, ahead of a third straight interest rate hike by the U.S. Federal Reserve later in the day, rebounding from lows hit after the announcement of a partial military mobilization by Russia.

* The mainland STOXX 600 index rose 0.9%, after hitting its lowest level since early July earlier in the day, after Russian President Vladimir Putin accused the West of “nuclear blackmail” over the war in Ukraine.

* Attention gradually shifted to the Fed’s monetary policy decision as the market forecasts a 75 basis point (bp) hike in its benchmark interest rate, continuing its aggressive fight against stubbornly high inflation.

* “Vladimir Putin’s decision to opt for partial mobilization while citing his nuclear arsenal is a serious development, but for now markets are too focused on what they expect the Fed to say,” said Chris Beauchamp of the trading platform. online IG.

* Some traders expect the US central bank to raise rates by one percentage point.

* Gains in defense stocks were also supportive, with Rheinmetall (ETR: RHMG ), Leonardo, Thales (EPA: TCFP ) and BAE Systems (LON: BAES ) rising between 4% and 9.3% %.

* However, Russia’s military mobilization amplified concerns about the conflict, which has raised the possibility of power rationing and possible blackouts during the winter, after Russia turned off taps on one of the country’s main natural gas pipelines. towards Europe.

* Germany confirmed the nationalization of Uniper (ETR: ), the country’s largest importer of Russian gas, in its fight for non-Russian energy sources. Shares in the gas importer fell 25.3%.

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