European stocks retreated, as the Ukraine crisis and Federal Reserve remarks dominate. European markets pulled back sharply on Monday as investors remain focused on Ukraine tensions and Federal Reserve officials’ remarks regarding interest rate forecasts. By mid-morning, the Stoxx 600 had fallen 2.7%, with banks losing 4.1% as all sectors and major exchanges lost ground.
As a result of fears of an impending Russian invasion, several countries have urged their citizens to flee the country. This is as a result of U.S. President Joe Biden’s national security advisor’s warning. He warned that the Kremlin has been accelerating its extraordinary military buildup along Ukraine’s border over the past 10 days. If Russia incurs any more incursions into Ukraine, western leaders have threatened sanctions against it, while continuing to pursue diplomatic solutions. Kremlin officials have denied any intent to invade their neighbors, accusing Washington of stirring up “hysteria.” Monday morning, Russian assets also declined, as the MOEX Russia Index fell 3.4% and the RTS Index fell 4.9%. The U.S. dollar bordered 0.2% higher against the Russian ruble.
Individual share prices continue to react to earnings reports in Europe ahead of the bell on Monday. Capgemini, Michelin, and BHP are amongst those that report. As a result of a whistleblower investigation into its accounting practices, Swiss chemicals company Clariant lost more than 17% of its value in early trading. Steel and mining company, EVRAZ, surged over 14% earning the top spot of the European blue-chip index and leading only a handful of shares in positive territory. Commerzbank shares plummeted 5.5% following a statement from German Finance Minister Christian Lindner to Handelsblatt newspaper that the government would shed its stake in the bank in the long run.
Will Fed Reserve Raise Prices Faster Than Expected?
As investors assessed tensions over Ukraine as well as deteriorating Covid-19 circumstances in Hong Kong, Asia-Pacific shares retreated on Monday, with Japan leading the losses. Early premarket U.S. stock futures also fell.
Since last week’s surprisingly high inflation print in the U.S., markets have been on edge, triggering concerns that the Federal Reserve could raise interest rates faster than anticipated. This led St. Louis Fed President James Bullard to call for an interest rate hike of a full percentage point before July. Nevertheless, fellow rate-setter and San Francisco Fed President Mary Daly argued on Sunday that the central bank should take a measured approach to tighten monetary policy, stating that “abrupt or aggressive action can actually destabilize the economy and undermine price stability.”