Frankfurt (Reuters) - Investors in Europe have digested the unrest caused by the mercenary uprising in Russia and are now turning their attention back to monetary policy.

However, ECB chief Christine Lagarde's speech at the annual monetary policy forum in Sintra, Portugal, on Tuesday did not put investors in a good mood. The leading German index, the Dax, lost its initial gains in the morning and was down slightly at 15,800 points. Its European counterpart, the EuroStoxx50, advanced by 0.2 percent to 4288 points.

According to Lagarde, the European Central Bank (ECB) will not abandon its tightening course for the time being in view of the continuing high level of inflation. It is also unlikely that the monetary authorities will be able to declare with absolute conviction in the near future that key interest rates have peaked. The hope of an imminent interest rate summit by the Fed is limiting the price losses, said Jochen Stanzl, analyst at broker CMC Markets. However, he urged caution. "Investors are currently still focusing on the fact that the Fed's key interest rates may be raised by another 25 basis points. However, they are ignoring the fact that they are already in restrictive territory and could remain there for some time." This means that fears of a recession are likely to catch up with the stock market in the coming weeks.

More and more bond investors are betting on a profound economic slowdown. The much-noticed yield gap - known as the spread in technical jargon - between two-year and ten-year German government bonds rose to 0.844 percentage points, surpassing the 31-year high it reached on Friday. Experts refer to this as an "inverted yield curve" because shorter-dated securities usually pay lower interest than long-dated bonds due to the lower risk. Experts regard such a development as a harbinger of a recession.

Meanwhile, oil prices extended their gains from the previous day. Supply fears due to the unrest in Russia and the expectation of rising demand for car gasoline during the US vacation season put investors in a buying mood. North Sea Brent crude and light US WTI crude each rose by around half a percent to 74.50 and 69.69 dollars per barrel respectively.

SIEMENS ENERGY TAKES A CAUTIOUS RECOVERY COURSE

Analysts at Goldman Sachs described the market reaction to the recent problems at Siemens Energy as "exaggerated" and thus lifted the share into positive territory. The experts recommend the shares as a "buy". The shares of the Munich-based electrical and energy technology manufacturer advanced by 3.2 percent, thereby reducing some of the losses of the past few days. The share price has plummeted by more than 30 percent since Friday. The problems with the onshore wind turbines already installed are greater than expected.

Dampened business prospects in the USA, on the other hand, weighed on the dialysis group Fresenius Medical Care. FMC shares fell by a good four percent on Tuesday morning, making it the biggest loser in the MDax second-line index. In the USA, it had previously been announced that the increase in reimbursement rates for dialysis services by the state health insurance scheme Medicare for senior citizens would probably be lower than expected.

Shares in Hamborner Reit also came under pressure. The real estate company's shares fell by more than six percent, bringing it to the bottom of the Sdax small-cap index. The company expects a decline in the value of its portfolio. Based on current information, the fair value of the real estate portfolio (like-for-like) is expected to fall by 5.5% to 6.0% as at June 30, 2023 compared to the end of 2022.

(Report by Zuzanna Szymanska. If you have any questions, please contact our editorial team at berlin.newsroom@thomsonreuters.com (for politics and the economy) or frankfurt.newsroom@thomsonreuters.com (for companies and markets).)