European stocks drop as traders weigh economic impact of Ukraine war.
European equities opened lower on Tuesday after Russia began a new ground offensive in Ukraine and the World Bank cut its global growth forecast, citing the inflationary effects of the war.
The Stoxx 600 share index fell 0.8 per cent, while London’s FTSE 100 traded flat and Germany’s Xetra Dax dropped 0.7 per cent. In Asia, Hong Kong’s Hang Seng share index fell 2.5 per cent as worries about global growth combined with a move by Chinese authorities to tighten regulations on the country’s lucrative live streaming industry.
Ukrainian president Volodymyr Zelensky said on Monday, when major European markets were closed for the Easter holiday, that Russia had concentrated a “significant part” of its forces in the country’s eastern Donbas border region. The World Bank also lowered its global economic growth forecast from 4.1 per cent to 3.2 per cent and predicted a contraction in Europe, which is vulnerable to sanctions against Russia and supply chain disruptions that cause energy and food prices to soar.
“Europe is in more of a precarious situation than the US,” given the region’s reliance on Russian oil and gas “and we see impacts on sentiment and economic activity that aren’t going to go away,” said Mary Nicola, multi-asset portfolio manager at PineBridge.
“But we are cautious on global equities overall,” she added. “The environment ahead is going to be increasingly challenging for most companies, with cost pressures mounting.”
Investors on Tuesday were also looking ahead to a week of corporate earnings for clues about how the business world was grappling with inflation and the uncertain growth outlook. Streaming group Netflix will report quarterly numbers later on Tuesday, with analysts watching to see whether a trend which saw UK households cancelling subscriptions to deal with rising living costs will be replicated elsewhere.
In debt markets, the yield on the benchmark 10-year US Treasury note traded flat at 2.86 per cent, remaining close to its highest point in late 2018. Bond yields move inversely to their prices.
On Thursday, Federal Reserve chair Jay Powell will give a speech that may provide guidance over how aggressively the US central bank will raise interest rates this year after the annual pace of consumer price growth hit 8.5 per cent in March.
The price of gold, which reached its highest point in a month on Monday as economic growth concerns drove investors to buy up the haven asset, was steady at $1,978 a troy ounce.
Brent crude oil dropped 1 per cent to $112.07 a barrel, after rallying for the past four days.
Chinese tech stocks slid on Tuesday, as markets reopened after the news that Beijing had tightened regulations on the country’s live streaming industry.