by Claude Chendjou
PARIS (Reuters) – European stock markets ended very sharply lower on Monday and Wall Street was also clearly in the red at mid-session in a context of caution linked to geopolitical tensions in Ukraine and pending decisions from the Reserve federal government (Fed) which meets on Tuesday and Wednesday.
In Paris, the CAC 40 ended down 3.97% at 6,787.79 points, its biggest drop since February 24, 2020. The British Footsie dropped 2.63% and the German Dax 3.8%.
The EuroStoxx 50 index fell by 4.14%, the FTSEurofirst 300 by 3.61%. The Stoxx 600, down 3.81%, suffered its worst session since March 18, 2020.
NATO placed its forces on alert on Monday and decided to send reinforcements to Eastern Europe amid an open crisis between Russia and Western powers who fear a Russian military operation in Ukraine. [L8N2U4027]
Part of the diplomatic personnel in Ukraine from the United States and Great Britain was also evacuated.
In the financial markets, the volatility index in Europe, also called the “fear index”, jumped 34.9%, the highest since January 2020, while its American equivalent rose 25%.
“Ukraine is clearly a concern weighing on the markets today,” said Darren Schuringa, managing director of ASYMmetric ETFs. “This will continue to weigh on markets for the foreseeable future until some sort of settlement is reached and more clarity on the outcome of the situation.”
Added to geopolitical tensions are uncertainties about the monetary policy of the Fed, which meets on Tuesday and Wednesday, in particular its intentions in terms of raising rates and reducing its balance sheet.
The expectation of these decisions caused the Nasdaq to plunge below its 200-day moving average last week, a first since April 2020.
The publication this week of a salvo of results from heavyweights in the economy also calls for caution. The market expects in particular this Monday the quarterly accounts of IBM and between Tuesday and Thursday those of Apple, Microsoft, Tesla and Intel.
VALUES IN EUROPE
In Europe, the transport and leisure index, down 5.4%, posted its worst performance in one session since March 17, 2020. The technology compartment (-5.7%) for its part posted its largest decline since March 18, 2020.
The raw materials sector, down 4.8%, also suffered in the wake of the sharp decline in the prices of base metals, such as nickel and copper.
In values, in air transport, Air France-KLM lost 3.1%, IAG 6.5% and Ryanair 3.2%.
On the high technology side, Worldline fell by 7.2%, Infineon by 6.1% and ASML by 7%.
Among rising stocks, Vodafone gained 4.5% after Reuters reports of talks with Iliad in Italy.
Orange for its part advanced by nearly 1%, sources familiar with the matter having told Reuters on Sunday that Christel Heydemann was about to take over as general manager of the operator.
AT WALL STREET
At the close in Europe, the Dow Jones fell 2.6%, the Standard & Poor’s 500 3.2% and the Nasdaq 3.9%.
If the trend is confirmed at the close, after the Nasdaq last week, the S&P could in turn suffer a correction on Monday, defined by a drop of at least 10% between a high point and a low point.
All compartments of the S&P are in the red, with nine sectors showing a drop of more than 2%.
In values, Tesla, which will publish its results on Wednesday, posted the largest drop (-7.7%) among the technology giants, whose index fell by 3.9%.
“For a lot of tech companies, valuations are certainly high in many cases and so if earnings aren’t there to justify them, there’s room for further corrections,” notes Darren Schuringa of ASYMmetric ETFs.
U.S. department store chain Kohl’s is soaring more than 35% on interest from private equity firm Sycamore Partners, according to people familiar with the matter.
In health, Pfizer lost 4.1% after the non-approval in the United States of its treatment against growth deficit in children.
THE INDICATORS OF THE DAY
The IHS Markit survey showed on Monday that the Omicron variant of the coronavirus had dampened services activity in the euro zone since the start of the month.
The composite flash PMI fell to 52.4, the lowest since February, and the services index fell to its lowest level in nine months at 51.2. The flash manufacturing PMI, on the other hand, reached a five-month high of 59.0. [L8N2U41FD]
CHANGES
At foreign exchange, the dollar took advantage of its status as a safe haven to appreciate by 0.38% against a basket of reference currencies.
The euro, down 0.26%, remains below the 1.13 dollar threshold.
Among cryptocurrencies, bitcoin, down 5.2% to $34,370, a decline of more than 50% since its peak in November, is penalized by general risk aversion.
RATE
Bond yields are down after NATO announcements.
The ten-year Treasuries rate fell by 2.1 basis points to 1.7262%.
That of the ten-year German Bund contracted by 3.9 points to -0.098%. Its French equivalent of the same maturity ended down 2.2 points to 0.309%.
In Italy, the ten-year yield fell 0.8 points to 1.348% as the process of electing the new President of the Republic begins.
OIL
On the oil market, black gold fell sharply due to fears of a rate hike and the appreciation of the dollar.
The barrel of Brent dropped 2.51% to 85.66 dollars and American light crude (West Texas Intermediate, WTI) 2.87% to 82.7 dollars.
(Report Claude Chendjou, edited by Jean-Michel Bélot)