European shares post biggest jump in over two weeks; Ukraine ceasefire in focus

By Twesha Dikshit and Ragini Mathur

Aug 7 (Reuters) - European shares logged their biggest daily rise in over two weeks on Thursday, boosted by financial stocks as investors weighed mixed corporate earnings, U.S. tariffs and a potential breakthrough to end the Russian-Ukraine conflict.

The pan-European STOXX 600 index .STOXX closed up 0.9% at a one-week high, with the European banks index .SX7E climbing 2% to its highest level since 2010 and the insurance index .SXIP up 1.6% to a record high.

Financial stocks have rallied in recent weeks as investors look for areas of the market less exposed to trade uncertainty.

U.S. President Donald Trump's higher import duties on many trade partners took effect on Thursday. Negotiations remain underway with Switzerland, which faces a 39% import levy that is likely to inflict serious damage on its export-focused economy.

Swiss stocks .SSMI settled 0.8% higher, with pharma companies Roche ROG.S and Novartis NOVN.S both rising as the sector is currently spared from the higher tariffs.

Also aiding the upbeat mood, the Kremlin said Vladimir Putin and Donald Trump will meet in coming days, raising expectations of a potential ceasefire in Ukraine.

The defence sector .SXPARO lost 2.3%, with German defence firm Rheinmetall RHMG.DE down 8% after missing second-quarter sales forecasts, partly due to delayed German defence contract awards.

"A Russia Ukraine peace deal should be positive for European consumers and risk sentiment and negative for oil prices. Sectors to benefit should be European consumers, growth sensitive and construction related sectors," said Mohit Kumar, an economist at Jefferies.

"It should also be positive for Eastern Europe as most of the reconstruction efforts would likely flow through Eastern European economies."

Tech stocks rallied globally on relief that companies committed to U.S. manufacturing, like Apple AAPL.O, would avoid tariffs.

The European technology index .SX8P was up 1.7%, with chipmakers BE Semiconductor BESI.AS, ASML Holding ASML.AS and SAP SAPG.DE all between 2.4% and 4.5% higher.

Danish drugmakers Novo Nordisk NOVOb.CO and Zealand Pharma ZELA.CO rose 6.7% and 4.7%, respectively, after U.S. competitor Eli Lilly's weight-loss pill data fell short of expectations.

Allianz ALVG.DE shares gained 4.1% after the financial services company posted a better-than-expected rise in second-quarter net profit, while Belgian lender KBC KBC.BR rose 6.3% to pre-financial crisis levels after raising its annual net interest and total income forecasts.

Raiffeisen Bank International RBIV.VI jumped 13.9% after a Russian court lifted a temporary freeze on shares of its Russian subsidiary.

Telecommunication stocks .SXKP were under pressure with Freenet AG FNTGn.DE and DT Telekom DTEGn.DE down 5.4% and 5%, respectively, after their quarterly results.

Of the 198 companies in the STOXX 600 that had reported earnings through Tuesday, 53% exceeded analysts' estimates, according to data compiled by LSEG. In a typical quarter, 54% beat forecasts.