Europe close: Equities rally as geopolitical tensions abate briefly

European equities rallied on Wednesday, extending earlier gains as investors shrugged off strained relations between Russia and Turkey.

The benchmark Stoxx Europe 600 index closed up 1.38%, while France’s CAC 40 gained 1.51% and Germany’s DAX jumped 2.15%.

As of 1639 GMT, the euro was broadly flat against the yen but lost 0.41% and 0.28% against the pound and the dollar respectively, while Brent crude was 1.47% to $45.45 a barrel.

Turkey shot down a Russian warplane on the Syrian border on Tuesday, claiming that it had entered Turkish airspace, although Russia rejected the claim.

Russian President Vladimir Putin called the incident “a stab in the back” and said it could have serious consequences for the countries’ relationship.

On Wednesday, Russia said it planned to send an advanced air defence system to reinforce its air base in Syria and was considering cancelling a raft of joint business projects with Turkey.

“The geopolitical issue has rapidly lost its importance outside the Turkish borders as the risks of an escalating military interaction are very low at this stage,” said Ipek Ozkardeskaya, market analyst at London Capital Group.

“Although the Russian President [Vladimir] Putin sounds very sharp on the matter, the Turkish response has been quite anodyne.

"Turkish President [Recep] Erdogan has been crystal clear on the issue, stating that Turkey has no intention whatsoever to escalate the tensions.”

US data takes centre stage

With very little of note on the economic calendar in the Eurozone, investors across the Atlantic welcomed a deluge of data ahead of Thursday's annual Thanksgiving Day celebration.

According to the Commerce Department, orders for US durable goods increased 3% last month, compared to forecasts for a 1.5% gain. September's 1.2% drop was revised to a 0.8% decrease. Elsewhere, consumer spending rose 0.1% month-on-month in October compared with a 0.1% increase in September and with analysts’ expectations for a 0.3% gain.

Meanwhile, according to the Labor Department, new claims declined by 12,000 to 260,000 in the week to 21 November, compared with analysts' expectations for a 271,000 reading.

"With such a raft of important figures released in one day, it was always going to be difficult to ascertain one single message from the data," said IG's market analyst Joshua Mahony.

"Yet with US services activity rising to a seven-month peak, core durable goods at a three-month high and jobless claims at the lowest level in a month, there is no doubt that the US economy is moving in the right direction.

"Unfortunately, the issue of inflation is likely to remain a crucial issue, with the Fed’s favoured measure, the core PCE price index, failing to grow for the first time in ten months."

In company news, Thomas Cook surged 8.19% after posting its first profit in five years and expressing confidence over 2016, while Metro rallied 5.62% after the German retailer lifted its 2015 dividend payout more than analysts were expecting.

Construction materials company LafargeHolcim gained 4.48% as it raised its dividend despite a drop in third-quarter sales.

On the downside, pharmaceuticals company Shire slid 1.26% following a report that it is working on a new offer for Baxalta.