Europe midday: Shares surge on Russia partial troop withdrawal

European shares extended gains and US futures jumped at midday on Tuesday on news Russia had partially withdrawn troops from the border with Ukraine in the first signs a diplomatic resolution to the crisis could be achieved.

The pan-European index bounced back from Monday's sharp sell-off to gain almost 1.3%. Investors were eyeing Tuesday's meeting between German Chancellor Olaf Scholz and Russian President Vladimir Putin after the latter appeared to be in favour of talks continuing with Western leaders keen to stop a war.

US futures rose, with the tech-heavy Nasdaq up more than 2%, while the Dow Jones was marked for a 1% gain and S&P 1.47%.

Sentiment was further boosted when the Russian Defence Ministry said some of the troops gathered around Ukraine had gone back to their garrisons, in a sign that it could be stepping back an invasion.

There were no details how many soldiers on were being loaded onto trains and trucks and sent back to base - which are still close to the border withy Ukraine. Defence Ministry spokesman Igor Konashenkov said that some military exercises that have raised fears of an attack against Ukraine — including in Belarus and in the Black Sea — were continuing.

“Units of the southern and western military districts, having completed their tasks, have already begun loading onto rail and road transport and will begin moving to their military garrisons today,” he said.

US stocks slipped again overnight as traders took a more pessimistic view on diplomacy, while hawkish St Louis Fed governor James Bullard called for a faster timeline on monetary tightening.

In economic news, Japan's fourth-quarter GDP expanded at an annualised 5.4% while British unemployment stayed at 4.1% in late-2021. However UK workers' earnings fell by 0.8% when adjusted for inflation.

“Markets are reacting positively to this morning’s news that some Russian troops will return to their regular bases once completing drills. We’re seeing many of the commodity prices which are sensitive to Russian supply falling and some of the ‘Risk off’ moves caused by Friday’s headlines now reversing," said Mike Owens, Global Sales Trader at Saxo Markets.

"Brent Crude and European gas falling 2.5% and 5.5% respectively. Palladium, where Russia’s exports are responsible for 45% of global production, falling by 3.5% and wheat by 2%. It should be noted that prices remain at elevated levels, and most are still higher than where they were last week."

On the equities front, shares in miner and commodities trader Glencore rose as it said it would pay $4bn (£3bn) to shareholders after reporting an 84% increase in underlying earnings boosted by soaring prices.

Randstad shares rose 5% after the recruitment firm topped market forecasts for fourth-quarter earnings, helped by some big multinational clients going on a hiring spree.

French IT consultancy Capgemini rose despite warning that its operating margin this year will likely be held back by inflationary pressures on salary and the cost of returning to offices.