European equities edged higher in early trade on Wednesday, extending gains from Tuesday after a batch of positive earnings and U.S. economic data briefly calmed worries over stretched valuations and the pace of economic recovery.
However, the prospect of more sanctions against Russia over the Ukraine crisis and a downed Malaysian airliner kept risk aversion on the table in the bond market, where German 10-year yields nudged down to 1.16 percent, just shy of record lows.
The euro also hit an eight-month low against the dollar on concerns that tougher Russian penalties might hit fragile euro zone growth.
The pan-European FTSEurofirst 300 share index was 0.3 percent higher at 0742 GMT, buoyed by better-than-expected earnings from German automaker Daimler and Dutch paint-and-chemicals firm AkzoNobel.
Gains were more muted in Europe – where the pace of economic recovery and the impact of a Russia slowdown have worried investors – than in much of Asia or the United States, where stocks hit fresh milestones and where earnings from bellwethers such as Apple Inc and Verizon topped forecasts.
“Geopolitical tensions are preventing a better market development in Europe,” said Christian Stocker, equity strategist at UniCredit.
“Markets will be dominated by consolidation moves due to the uncertainty, combined with high valuations.”