European shares show signs of recovery as Fed meeting awaited

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, January 25, 2022. REUTERS/Staff

By Anisha Sircar and Shreyashi Sanyal

(Reuters) - European shares extended gains to record their best session since early December on Wednesday as recently bruised energy, travel and technology stocks recovered ahead of a U.S. Federal Reserve monetary policy meeting.

The pan-European STOXX 600 rose 1.7%, with all sectors in positive territory, marking the second straight session of gains after it fell by about 4% on Monday.

After being hit by concerns over conflict in Ukraine, oil & gas stocks rose 4.0%, their best day since November 2020 and leading gains, alongside travel and miners.

"Geopolitical tensions have resulted in a trimming of gains, but overall a wave of buying has swept over markets today," Chris Beauchamp, chief market analyst at online trading platform IG, said.

Technology stocks, representing many of Europe's growth-oriented firms, also bounced after coming under pressure from expectations of a hawkish Fed stance.

The U.S. central bank will update its interest rate plan at 1900 GMT after a two-day meeting, with markets priced for a first rate hike in March and three more quarter-point increases by the end of the year. [FEDWATCH]

"We expect the Fed to be clear about raising rates in March, and once we get past that, markets might be more reassured," said Nick Nelson, head of European equity strategy at UBS, adding that the focus would soon turn to fourth-quarter earnings in Europe, which are also set to be positive for markets.

Italian fashion group Tod's jumped 15.8% after sales rose by nearly 40% last year, its first increase after five years of declines and beating market forecasts.

Hygiene products group Essity fell 6%, after posting a bigger-than-expected fall in quarterly profit and saying it planned to raise prices further in the face of record high costs.

Italy's biggest debt recovery firm doValue gained 2.8% after saying it would aim to keep the amount of loans it manages stable at 160 billion euros ($181 billion) to the end of 2024.

BioNTech SE gained 6.3% after the company and Pfizer (NYSE:PFE) said that they had started a clinical trial to test a new version of their vaccine specifically designed to target the COVID-19 Omicron variant.