money European stock markets crash as Biden and Putin agree to Ukraine summit
European stock markets were in the red on Monday as investors kept their focus on the intensifying situation in Ukraine and strong UK PMI data.
The FTSE 100 (^FTSE) lost earlier gains to close 0.3% in the red as Russian miners pulled London's blue-chip index into reverse on Monday afternoon.
Anglo-Russian miner Polymetal International (POLY.L) was the biggest FTSE faller, plummeting 8.2% as tensions rose. Evraz (EVR.L), which is controlled by Russian billionaire Roman Abramovich, crashed 5.4%.
AstraZeneca (AZN.L) was the FTSE's best performing stock after being lifted by positive trials of its breast cancer drug. Shares in the pharmaceutical firm rose as much as 4%.
The mid-cap FTSE 250 (^FTMC) swung to a bigger loss, declining over 1.2% to an 11-month low. Petropavlovsk (POG.L), one of Russia's major gold mining companies, dropped 10% to the bottom of the index.
"Such is the sensitivity on the financial markets right now, temporary confidence can evaporate rapidly and that’s what we’ve seen today after what appears to be another deterioration in relations between Russia and Western powers," said Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown. "The FTSE 100 erased gains in early trading and the DAX in Frankfurt and CAC 40 in Paris fell into negative territory."
It comes after new IHS Markit figures revealed the UK economy bounced back strongly in February as COVID measures eased. IHS Markit's composite purchasing mangers' index (PMI), which comprises services and manufacturing activity, jumped to 60.2 from 54.2 in January, marking an eight-month high.
Britain's largest sector, services, rose to 60.8 in February up from 54.1 in January 2022. Analysts were expecting a rebound to 55.5. The equivalent measure for manufacturing reached 56.7 in February — a seven-month high. This was up from 54.5 in January. Manufacturing output was unchanged from January at 57.3.
But, the economy is firing on all cylinders as separate figures from Rightmove (RMV.L) showed average UK house prices rose 9.5% year-on-year to £348,808 ($475,535). This was the highest annual growth since 2014. Asking prices for homes coming on to the market in Britain rose by a record 2.3% in February — the biggest monthly increase since the property website began keeping records 20 years ago.
Read more: UK economy shrugs off Omicron slump as private sector rebounds to eight-month high
Sterling (GBPUSD=X) was over 0.1% higher against the US dollar to $1.361 and remained in positive territory against the dollar despite reducing risk appetite.
Natural gas (NG=F) prices were 8.1% higher amid rising hopes of a diplomatic solution to the Russia-Ukraine conflict.
Elsewhere in Europe, France’s CAC (^FCHI) crashed 2.1% and the DAX (^GDAXI) tumbled 2% in Germany.
German factory inflation surged to its fastest pace in the post-war era, fuelling expectations that producers will pass higher costs onto consumers. Producer prices in the eurozone’s biggest economy jumped 25% in January compared to last year — the sharpest growth since 1949.
Separate IHS Markit numbers released on Monday showed that the eurozone economy rebounded in February, despite soaring prices. New orders in the region rose at the fastest pace in nearly 15 years as firms struggled to meet demand.
Its flash composite PMI for the eurozone, seen as guide to overall economic health, jumped to a five-month high of 55.8 in February up from 52.3 in January. Analysts were expecting 52.7.
Manufacturing PMI fell to 58.4 from 58.7 in January — a two-month low. Meanwhile, manufacturing output in the eurozone came in at a five-month high to 55.6, compared to 55.4 in January.
Read more: UK property asking price jump to record £348k in February
Major benchmarks in the US posted weekly losses amid geopolitical tensions and uncertainty over the Federal Reserve’s monetary policy while rising inflation whipsawed market sentiment.
The tensions could choke growth in the world’s biggest economy, and raise the likelihood of further swings in markets in an already volatile year.
US president Joe Biden said on Friday that he’s convinced Russian president Vladmir Putin has decided to move against Ukraine.
Watch: Ukraine welcomes Biden-Putin summit initiative
With the prospects of averting a war dim, diplomatic efforts to hold talks have continued with French president Emmanuel Macron paving the way for a potential Putin-Biden summit on the crisis.
Meanwhile, last week’s announcement that US secretary of state Antony Blinken and Russian foreign minister Sergei Lavrov agreed a meeting was soon overshadowed by events on the ground in Ukraine as an around 150,000 Russian troops were positioned at the country’s border. Blinken and Lavrov are due to meet on Thursday.
US markets were looking at a quiet afternoon as markets were closed on Monday for President’s Day.
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Wall Street’s S&P 500 (^GSPC) fell 31.39 points or 0.7% to 4348.87 on Friday ahead of the long weekend. The decline took the blue-chip index’s weekly losses to 1.6%, bringing its yearly losses to 8.8%.
The tech-heavy Nasdaq (^IXIC) declined over 1.2%, finishing the week down 1.8%. The Dow Jones (^DJI) edged 0.7% lower.
In government bond markets, the yield on the benchmark 10-year US treasury note (^TNX), which moves inversely to its price and underpins borrowing costs worldwide, fell 0.05 percentage points, or 2% to 1.92%.
"Whatever happens investors aren’t talking any chances, with money going into havens like gold and US treasuries, sending US 10 year yields back below 2% for the second week in succession," said Michael Hewson, chief market analyst at CMC Markets.
While, Wall Street futures and Asian equity markets rallied on the announcement that Putin and Biden agreed in principle to hold a summit on the Ukraine crisis. Russian stocks posted their biggest declines since the financial crash in 2008 amid the tension.
The benchmark MOEX Russia index (IMOEX.ME) crashed 11%, while the dollar-denominated RTS index (RTSI.ME) tumbled 13.2% at Monday close.
Asian markets pared sharp early declines on Monday as a glimmer of hope emerged for a diplomatic solution to the Russian-Ukraine standoff.
The Shanghai Composite (000001.SS) closed the session flat. Chinese tech stocks plummeted on Monday morning, heading for their worst two-day drop since July amid fears Beijing could clamp down further on the sector. Video game giant Tencent (TCEHY) led the losses, falling 2.5%, while Alibaba (BABA) dropped 4.3%.
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The Hang Seng (^HSI) declined 0.8%.
The Nikkei (^N225) retraced some of its earlier losses, falling 0.8% in Japan. It comes after the country's flash manufacturing PMI grew at the slowest rate in five months in February, dropping to 52.9 from 55.4 last month. Services also contracted at the quickest rate since May 2020 after the index fell to 42.7 from 47.6.
Overseas, the MSCI's broadest index of Asia-Pacific (AAXJ) shares outside Japan reduced their losses to be down 0.8%.
