European markets close mixed awaiting changes in China’s Covid policy

The U.K. gilt market is “not back to normal” after the Bank of England intervened on Sep. 28, according to Governor Andrew Bailey, who spoke in front of a lawmakers’ committee Tuesday.

The governor said the bank didn’t want to buy index-linked gilts, but “had to solve” the problems triggered by former Prime Minister Liz Truss’ mini-budget.

The gilt market was “within an hour of having a severe problem” when the bank stepped in, the governor added.

Ryanair’s CEO said Christmas bookings are “very strong” when he spoke to journalists in Brussels.

“This winter is amazing … Christmas is very strong,” Michael O’Leary said.

O’Leary’s comments come after rival airline easyJet said its holiday demand is holding up, despite growing pressure on household budgets.

— Hannah Ward-Glenton

Francesco Starace, CEO at Enel, told CNBC’s Steve Sedgwick that energy markets are facing “extreme volatility” for one or two years.

Starace spoke from the Goldman Sachs Carbonomics event.

Shares of Aroundtown Property have dropped 7% after the German real estate company announced earnings for the first nine months of 2022.

Aroundtown made a net profit of 578 million euros ($598 million), which was roughly in line with guidance.

— Hannah Ward-Glenton

“China is underestimated by the rest of the world right now, but the speed of reopening will be critical,” Virginie Maisonneuve, Global CIO of Equity at Allianz told CNBC’s “Street Signs Europe.”

European markets have been flat Tuesday as investors consider the impacts of ongoing lockdown protests across China.

The German consumer price index shrank by 0.5% month-on-month in November for a 10% year-on-year increase, according to flash estimates from the federal statistics agency released on Tuesday.

This was below consensus forecasts for a 0.2% monthly decline and 10.4% annual increase. The figures will fuel expectations that inflation across the euro zone will post its first decline since mid-2020 later this week.

– Elliot Smith

HSBC shares climbed more than 5% by mid-afternoon to lead the Stoxx 600 after the British-headquartered bank agreed to sell its Canadian business to Royal Bank of Canada for 13.5 billion Canadian dollars ($10.4 billion).

At the bottom of the European blue chip index, Aroundtown shares fell more than 6% after the Luxembourg-registered real estate company’s nine-month results.

– Elliot Smith

Economic sentiment in the euro zone rebounded by slightly more than expected in November, improving for the first time since Russia’s invasion of Ukraine in February.

The economic sentiment indicator produced by the European Commission rose to 93.7 in November from 92.7 in October, slightly above consensus projections of 93.5 in a Reuters poll of economists.

Sentiment in industry deteriorated sharply, but was offset by a significant spike in services sentiment, while inflation expectations among both consumers and businesses also plunged.

– Elliot Smith

Credit Suisse shares slid to a fresh record low on Tuesday as investors offloaded subscription rights to new shares in the embattled Swiss lender.

Shares were down 3.4% by late morning to trade at just over 2.9 Swiss francs as the subscription rights plummeted on their second day of trading in Zurich, while five-year credit default swaps — a form of insurance on the company’s bonds — shot to an all-time high.

Shareholders last week approved the bank’s planned $4.2 billion capital increase, which is intended to fund a massive strategic overhaul after years of investment bank underperformance and compliance failures.

— Elliot Smith

Chinese health authorities said that officials are “closely watching” the developments of Covid when asked if protests in the region would lead to shifts in its zero-Covid policy. CNBC’s Karen Tso and Geoff Cutmore discuss the market reaction to the press briefing.

ASM International shares climbed 6.5% in early trade to lead the Stoxx 600 after the Dutch semiconductor company upgraded its fourth-quarter guidance.

At the bottom of the index, British private equity firm Bridgepoint Group slid 4.7% after media reports suggested the firm is considering a $1 billion acquisition of energy transition investsor Energy Capital Partners.

The Chinese government is unlikely to make sudden changes to its zero-Covid policy as that will bring chaos, National University of Singapore Professor Wang Gungwu said on CNBC’s “Squawk Box Asia.”

“If you change the policy suddenly, I think the damage and the consequences would be even worse — it’d be really chaotic because I think the spread of Covid will be absolutely unprecedented,” said Wang.

He added that he expects Chinese leader Xi Jinping to make adjustments on more local levels to ease public dissent.

Wang said Xi doesn’t want to officially admit the “policy has been wrong for quite a while,” but also cannot change it immediately.

– Jihye Lee

Oil prices climbed ahead of a press conference which will be held by China’s State Council, as investors continue to monitor developments – paring some losses seen on Monday, when it reached the lowest levels in almost a year.

The West Texas Intermediate futures climbed up 1.76% to stand at $78.59 per barrel, while the Brent crude futures climbed 2.28% to stand at $85.00 per barrel.

However, oil markets may be “misjudging news of China’s lockdown,” Rystad Energy wrote in a note.

“[The latest lockdowns’] likely effect on China’s short-term oil demand, particularly in transportation, is likely to be minor,” the note added, citing the company’s own research of real-traffic activity in China.

Even with daily Covid cases continuing to climb, cities like Shanghai have not shown a slowdown in road traffic activity, according to Rystad Energy’s own research.

— Lee Ying Shan

It’s “critical” for investors to be looking at valuations right now as a recession is looming and inflation looks likely to continue, said Steven Glass, managing director of Pella Funds Management.

In this environment, Glass selected a list of nine stocks that he said, “look particularly cheap given their growth outlook.”

CNBC Pro subscribers can read more here.

— Weizhen Tan

European markets are heading for a mixed on Tuesday as investors keep a close eye on China amid speculation that the government could make changes to its strict zero-Covid policy.

The U.K.’s FTSE index is expected to open 46 points higher at 7,494, Germany’s DAX down 3 points at 14,401, France’s CAC up 2 points at 6,675 and Italy’s FTSE MIB up 27 points at 24,523, according to data from IG.

Earnings come from Easyjet and data releases include euro zone consumer confidence and business climate data for November.

— Holly Ellyatt