Europe ends in the red, caution on Ukraine and economy

PARIS (Reuters) – European stock markets closed lower on Thursday and Wall Street also traded lower mid-session, with caution prevailing after Moscow said the draft peace deal it presented to Ukraine would be “unacceptable.” On the economic front, the prospect of monetary tightening is resurrecting fears of a slowdown in growth.

In Paris, the CAC 40 fell 0.57% to 6,461.68. British Footsie lost 0.47% and German Dax lost 0.52%.

The EuroStoxx 50 fell 0.59%, the FTSEurofirst 300 fell 0.23% and the Stoxx 600 fell 0.21%.

Russian Foreign Minister Sergei Lavrov said on Thursday that Ukraine presented Russia with a draft peace agreement the day before, which contained “unacceptable” clauses, while Ukrainian Deputy Defense Minister Anna Malyar believed that Russia wanted to conquer all of Ukraine.

The prospect of new European sanctions against Russia, which could be announced this Thursday or Friday, also encouraged investors to be cautious.

On monetary policy, the “minutes” of the Federal Reserve’s March meeting, released on Wednesday, confirmed that only the war in Ukraine prevented the US central bank from announcing a half-point rate hike last month and that it could start shrinking its balance sheet in next month.

In Europe, European Central Bank (ECB) minutes released on Thursday showed that a majority of Governing Council members appeared to be in favor of cutting monetary support at its March meeting and that they felt that the conditions for raising interest rates had been or should be met. .

The Reuters poll of economists also shows that the risk of a recession in the eurozone has increased, and now the probability is 30%.

A sign of market jitters, the US volatility index rose more than 5%, while its European equivalent closed above 32, the highest since March 28.

VALUES

The defense healthcare sector (+1.3%) was one of the few large segments of the Stoxx 600 that remained in the black. Energy (-1.57%) and raw materials (-0.6%), for their part, showed one of the biggest falls, in particular, due to the strengthening of the dollar.

TotalEnergies, BP, Eni and Shell lost 0.9% to 2.1%. Shell also announced that its exit from Russia would result in exceptional spending of up to $5 billion, much more than expected.

In M&A, Atlantia stock rose 6.8% after being approached by Global Infrastructure Partners (GIP) and Brookfield Infrastructure, although the Benetton family that controls the highway and airport operator rejected the approach.

ON WALL STREET

In Europe, the Dow Jones fell 0.74%, the Standard & Poor’s 500 fell 0.53% and the Nasdaq fell 0.77%, with airline stocks posting some of the biggest losses in the sector.

Shares of American Airlines Group, Delta Air Lines and United Airlines Holdings fell 2.7% to 3.8% as Barclays said the recent rise in oil prices will weigh on airlines’ first-quarter results.

Banking (-1.86%), such as Bank of America and Morgan Stanley, were also in the red, while techies (-0.53%) continued to decline with Tesla, Apple and Alphabet.

On the other hand, HP shares rose more than 15.6% thanks to Warren Buffett’s Berkshire Hathaway, which acquired a stake in the computer group worth about $4.2 billion.

INDICATORS OF THE DAY

Industrial production in Germany rose slightly in February, at 0.2%, despite the deficit.

In the United States, jobless claims fell to 166,000 last week.

CHANGES

The dollar is stable against other major currencies (+0.07%), very close to its peak since May 2020, reached in the session.

The Federal Reserve’s report “suggests the Fed is hitting the brakes hard, which should be positive for the dollar,” ING analysts wrote.

The euro, which fell to $1.0866, its lowest level since March 8, rose slightly against 1.0902 after the minutes of the ECB’s March meeting.

INDICATOR

Eurozone government bond yields, which slipped ahead of the ECB’s minutes, ended up higher as investors appeared to have noticed a more restrictive bias than expected.

“It appears that many members (of the Governing Council of the ECB) wanted an immediate policy normalization, so it is possible that the ECB will support the fight against inflation,” said René Albrecht, rates strategist at DZ Bank.

German 10-year yields rose 3.2 basis points to 0.679%, while 2-year yields, the most sensitive to changes in rates, rose 1.9 basis points to -0.026%.

France’s 10-year OAT rose 3.3 points to 1.219% as markets began weighing Marine Le Pen’s chances of winning the presidential election.

In the United States, 10-year Treasury yields rose 2.4 points to 2.6334%, while two-year Treasury yields fell 5.5 points to 2.447%.

BUTTER

Oil prices are falling after the US Senate approved a ban on Russian oil imports. On the eve of the International Energy Agency (IEA) has already reported that its member countries are going to resort to a massive release of their strategic reserves. Japan said on Thursday it would release 15 million barrels of its reserves, a record high.

A barrel of Brent oil lost 1.64% to $99.48, while a barrel of American light oil (WTI) lost 1.28% to $94.95.

(Report by Claude Shenju edited by Bertrand Busy)

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