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European shares slightly lower as traders weigh the prospect of more sanctions on Russia


European stocks inched lower on Tuesday, as investors weighed the prospect of an escalation of sanctions against Russia, including a potential ban on imports of its coal and oil.

The Stoxx 600 in the region lost 0.1%, after posting small gains earlier in the session. Germany’s Dax lost 0.5%, while London’s FTSE 100 dropped 0.1%. Futures that track Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 both fell 0.3 percent.

The moves come after the United States and France called for a escalation of sanctions against Russia, following reports of atrocities by its forces in Ukraine.

French President Emmanuel Macron called for a ban on imports of Russian oil and coal, although he did not call for a ban on imports of Russian gas, an important fuel source for Germany, Italy and some Eastern European countries. US President Joe Biden said he would “continue to add more sanctions” against Russia and called for a trial to assess possible war crimes by President Vladimir Putin’s forces. in Ukraine.

Oil prices rose on Tuesday, with Brent crude, the international benchmark, adding 0.9% to $108.43 a barrel. Futures linked to TTF, Europe’s wholesale natural gas price, were 2.8% higher at €111.7/megawatt hour.

Tancredi Cordero, founder of Kuros Associates, said the German economy “will in particular see its average input costs, when it comes to energy and commodities, increase significantly, which should reduce operating profit margin of most domestic companies”.

“I don’t think there will be a recession [in Germany], it’s a very strong economy,” he added. “But in the short term, Germany will have reduced exposure to institutional investors.”

Florian Ielpo, multi-asset portfolio manager at Lombard Odier Investment Managers, said that if not for a full-blown recession, Europe could be set on a protracted stagnation of inflation, said .

“This is not necessarily bad for stocks,” he said. “If you are a company [secure enough] in your market to be able to push up costs for consumers, you can’t really afford to suffer from an increase in inflation in the first place and we’re still in the early stages. “

Supply chain disruptions caused by Russia’s invasion of Ukraine in February have added to concerns about persistently high levels of inflation globally, with analysts expecting central banks to tighten monetary policy further in response.

Data released on Tuesday shows that rising food and energy prices have pushed inflationary to a 30-year high in February in the OECD group of rich countries. The annual consumer price share in the 38 member countries increased by 7.7%, up from 1.7% a year ago.

In the government debt market, the yield on the 10-year US Treasury note – which fluctuates inversely to its price and is a benchmark for borrowing costs around the world – added 0.06 percentage points to 2.47%.

German government bonds were also under pressure, with yields on 10-year packages adding 0.04 percentage points to 0.56%. The UK’s equivalent gilding yield added 0.08 percentage points to 1.63 per cent.

Elsewhere in stock markets, Japan’s Nikkei 225 stock index closed 0.2 percent higher, while the broader Topix index fell 0.2 percent. Markets in China and Hong Kong were closed on Tuesday for a public holiday.



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