Europe close: Stocks sell off amid geopolitical tensions, Fed rate hike fears

By Alexander Bueso

Date: Monday 24 Jan 2022

Europe close: Stocks sell off amid geopolitical tensions, Fed rate hike fears

(Sharecast News) - European shares were walloped at the start of the week amid rising tensions on the border between Russia and Ukraine, even as investors were aleady fretting about the pace of potential interest rate hikes in the US.
The pan-European Stoxx 600 index dropped 3.81% to 456.36, alongside a 3.97% fall on the French Cac-40 to 6,787.79 and a 4.02% fall to 25,972.90 on the FTSE Mibtel.

Sparking the latest round of selling, at the weekend, the US State Department said it would pull out family members of its embassy staff in Kyiv and the UK took similar measures while Nato forces were being sent to neighbouring states and talk of an EU mission to Ukraine resurfaced.

"The escalating drumbeat of conflict risk in Ukraine has seen European equity markets fall back sharply today [...] as concerns increased that a conflict was getting closer," said Michael Hewson, chief market analyst at CMC Markets UK.

"Reports during the day that NATO is putting additional ships and aircraft on standby, and that the US is considering sending troops to shore up its Baltic defences, has also upped the ante, after requests from the likes of Estonia for a greater US presence to deter a potential Russian escalation."

Shares were also depressed by a report that showed economic activity in euro area services slowed more sharply than expected in January as renewed Covid-19 restrictions on account of Omicron led to a marked slowdown.

IHS Markit's Purchasing Managers' Index for services slipped from a reading of 53.1 for December to 51.2 in January against a consensus: 52.1.

In equity news, shares in building cladding maker Kingspan fell 12% as the UK government threatened to restrict trading unless the industry paid to fix dangerous housing in the wake of the 2017 Grenfell tower fire which killed 72 people.

Barratt Developments, Bellway and Berkeley Group all fell as Jefferies downgraded the shares to 'hold' from 'buy'.

The broker said that whether housebuilders should or will shoulder the whole burden of cladding remediation is a "complex and emotive" discussion. Even including a worst-case scenario of a 12% tax rate to fund remediation, it still sees value in the sector.

Renault retreated as the French carmaker, Japan's Nissan and Mitsubishi Motors reportedly planned to triple their investment to jointly develop electric vehicles.

Unilever climbed 6% after reports that activist hedge fund Trian Partners, owned by Nelson Peltz, had built a stake in the consumer goods company.

Vodafone gained following a report that it has approached the Hong Kong owners of rival mobile phone company Three UK about a merger amid rumours the company itself could be a takeover target for a predator. According to the Mail on Sunday, Vodafone held talks late last year with Asian conglomerate CK Hutchison, owner of Three UK, about buying its rival.


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