Shares drop exacerbated by conflict in Ukraine, euro below $1.10 – 03/04/2022 at 13:59


EUROPEAN STOCK EXCHANGE RED TIME SESSION

Letitia Volga

PARIS (Reuters) – Wall Street is expected to be in the red as European stock markets plummeted mid-session on Friday amid renewed worries over a Ukrainian dossier favoring safer assets such as gold and sovereign debt.

Index futures open down 0.95% for Dow Jones, 1.11% for Standard & Poor’s and 1.08% for Nasdaq.

In Paris, the CAC 40 lost 3.77% to 6,137.88 around 1230 GMT, its lowest level since April 2021.

In Frankfurt, the Dax fell 3.77% and in London the FTSE fell 3.41%.

The pan-European FTSEurofirst 300 fell 2.95%, the Eurozone EuroStoxx 50 fell 3.79% and the Stoxx 600, the lowest of the year, fell 3.05%.

News of the takeover by the Russian army of a nuclear power plant in Zaporozhye, Ukraine, rocked the markets since early morning. Although the International Atomic Energy Agency has given assurances that the safety of Europe’s largest nuclear power plant is safe, risk aversion continues unabated.

“You have a growing inflationary risk, you have a huge uncertainty about what will happen in Ukraine, and a Russian president who does not exclude the presence of nuclear weapons is quite a toxic background,” said Michael Hewson, an analyst at SMS Markets.

The EuroStoxx 50 volatility index is 15.25% and exceeds 45 points for the first time since April 2020.

The 1330 GMT release of US monthly employment data, traditionally eagerly anticipated, could have had only a limited impact on the trend.

“The labor market report is expected to receive less attention than usual today as Ukraine continues to dominate financial market development,” Yu-Na Park-Heger, an analyst at Commerzbank, wrote in a note.

She added that the employment data is unlikely to materially influence the Federal Reserve’s next monetary policy decision, as an interest rate hike is likely regardless of whether the report is strong or weak.

VALUES IN EUROPE

In Europe, all Stoxx sectoral indexes are moving in the red, with the most notable declines affecting the banking sector (-5.21%) and the automotive sector (-4.67%).

“No one buys a new car when commodity prices are skyrocketing. [des constructeurs] will be significantly reduced,” said Michael Hewson of CMC Markets.

Shares of Michelin fell 6.27%, the lowest in more than a year, after announcing the halt of several production lines due to supply issues linked to the conflict in Ukraine.

Among other large companies on the Russian market, Societe Generale shares fell 7.55% and are now more than 40% down from their peak in mid-February.

Dutch bank ING tumbled 6.08% after it was announced on Friday that new sanctions against Russia affected about EUR 700 million in outstanding loans.

INDICATOR

A decrease in assets considered less risky than stocks leads to a decrease in yields in the bond market. The price of 10-year Treasuries fell about seven basis points to 1.7786% after a day’s low of 1.7%.

Its 10-year German equivalent fell 5.5 basis points to -0.039%.

CHANGES

The dollar, also benefiting from safe-haven purchases, gained 0.59% against a basket of international currencies.

The euro is trading below $1.10 for the first time since May 2020, down 0.9%. Against the Swiss franc, the single currency hit a seven-year low.

“The euro is sort of in the epicenter of risk aversion,” said Mizuho’s Neil Jones.

Given soaring energy prices and the European Central Bank’s reluctance to change its interest rate policy, “the euro’s downtrend is likely to continue,” he added.

While money markets are not expecting a rate hike from the ECB next week, a 25 basis point rate hike is expected from the Fed at its mid-March meeting, which should widen the divergence between policymakers.

BUTTER

Oil prices have risen sharply again as fears of disruption to Russian exports in the face of Western sanctions far outweigh the prospect of increased supplies from Iran if an agreement is reached with Tehran on the nuclear program.

Brent added 2.02% to $112.69 a barrel after peaking since May 2012 at $119.84 a day earlier. A barrel of American light oil (West Texas Intermediate, WTI) costs 2.57% to $110.44.

They are heading towards their strongest weekly gain since mid-2020.

(Letitia Volga, edited)

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