European stocks declined on Friday, trimming their best weekly gain since November 2020, as investors monitored developments in the war in Ukraine.
The Stoxx Europe 600 Index was 0.7 per cent lower by 11:11 a.m. in London. Food, tobacco and mining stocks outperformed, while autos and real estate were among the biggest laggards.
Oil, which had crumbled some 30 per cent from last week’s peak, has bounced hard as traders fret that hope for peace in Ukraine is misplaced. Brent crude futures were last up 2 per cent and at $108.64, have added more than $10 a barrel in two sessions.
US market volatility could also be higher today as about $3.5 trillion (€3.2 trillion) of single-stock and index-level options are set to expire in a quarterly event known as triple witching.
Shares extended declines to session low as Federal Reserve Bank of St Louis president James Bullard said he dissented at this week’s meeting because he wanted the US central bank to implement a balance-sheet reduction plan and added he favours raising rates more sharply this year than any of his colleagues.
Shares in the region have been recovering from a selloff fuelled by concerns over the war’s impact on regional growth, which added to worries about surging inflation and hawkish central bank policies.
The Stoxx 600 is about 1 per cent away from erasing its losses since Russia invaded Ukraine on February 24th.
“Investors continue to keep an eye on geopolitics but focus is turning now more to margins, how commodities will hit businesses and expected estimates revisions,” said Patrick Nielsen, deputy general manager at Mapfre Asset Management.
“We have a more cautious view on equities now, but expect markets to be in a range for a bit as we have already seen the bottom of the declines, as long as the war doesn’t take a more negative turn.”
In the latest developments, Russia’s foreign minister repeated a threat to target arms convoys in Ukraine sent by the US and its allies, while missiles again hit areas in the far west of Ukraine.
Elsewhere, US stock index futures dipped at the end of a choppy week marked. The broad declines could snap a three-day rally that had put the S&P 500 index and the Dow Jones Industrial Average on track for their best week since November 2020.
Meanwhile, Russia continued its bombardment of Ukrainian cities as it fired missiles at an airport near Lviv on Friday amid little sign of any breakthrough in peace talks.
Markets digested news around the conflict and the Fed’s expected move to raise its key lending rate by a quarter of a percentage point on Wednesday. The US central bank also forecast an aggressive plan for further hikes while policymakers trimmed economic growth projections for the year.
“We prefer a hedging strategy and selective equity exposure over exiting risk assets,” wrote Mark Haefele, chief investment officer at UBS Global Wealth Management in a client note.
“Energy stocks provide a hedge against risks arising from the war in Ukraine, while financials and value stocks tend to outperform in periods of rising rates.”
At 6.45am eastern time, Dow e-minis were down 189 points, or 0.55 per cent, S&P 500 e-minis were down 29.5 points, or 0.67 per cent, and Nasdaq 100 e-minis were down 100 points, or 0.71 per cent.
Shares of Boeing rose 0.4 per cent as it closed in on a landmark order from Delta Air Lines for up to 100 of its 737 Max 10 jets, people familiar with the matter said.
US delivery firm FedEx fell 3.1 per cent as it posted lower-than-expected quarterly earnings on Thursday, while video game retailer GameStop Corp slipped 8.3 per cent on reporting a net loss for the fourth quarter.
MSCI’s broadest index of Asia-Pacific shares outside Japan was flat and Hong Kong’s Hang Seng steadied following a furious two-day surge. Japan’s Nikkei rose 0.6 per cent. S&P 500 futures eased 0.4 per cent while Euro Stoxx 50 futures and FTSE futures were flat.
