European shares bounce back from a two-week slide, as investors' fears of an escalation in Ukraine eased. But several geopolitical concerns remain, and any relief rally could be fragile. Ivor Bennett reports
The shelling hasn't stopped, but for now at least it's at a safe distance. The easing of tension in Ukraine offering a vital reprieve for residents of Donetsk, and markets. European shares rose for the first time in two weeks after Russia ended military exercises near the Ukrainian border. While worries of an incursion have gone for now, other concerns remain, says CIBC's Jeremy Stretch. SOUNDBITE (English) JEREMY STRETCH, HEAD OF FX STRATEGY, CIBC, SAYING: "I guess from a euro zone perspective we need to see some moderation in some of these risk factors, particularly as we go through towards the European winter, and of course the question of energy supplies becomes more of a relevant issue. So any lowering in the political temperature in that region will be good news for the euro zone, albeit of course the broader fundamental story remains relatively challenging." Recent geopolitical tensions have hit markets hard. Europe's benchmark index - the FTSEurofirst 300 - has sunk as much as 7.4 percent since mid-June with Ukraine, Iraq and Gaza weighing heavy on investors. But the sell-off has given bargain-hunters a chance to pounce, says Robert Parker from Credit Suisse. SOUNDBITE (English) ROBERT PARKER, HEAD OF STRATEGIC ADVISORY, CREDIT SUISSE, SAYING: "We're now in a situation where the bad news is fully discounted and obviously markets are cheaper. So I take the view and stick to the view that August, with the setback, represents a buying opportunity and I think this is the start of a rally which has legs and which will go into, at least, September and October." The situation in Ukraine though is still uncertain. The government says it is close to retaking the city of Donetsk. But huge swathes of the region are still under rebel control, who say the fighting won't end unless Kiev withdraws first.