European stocks pared back heavy morning losses on Monday but were still down more than 2% as the possibility of a ban on Russian oil imports ban rattled investors.
The pan-European Stoxx 600 index had slumped 3.6% in early deals, with the German DAX and French CAC down more than 2.4% at midday having seen falls of 4.5% in the morning session. London’s FTSE was down 1.53%, helped by gains in mining and energy stocks.
Brent crude prices raced towards $140 a barrel after US Secretary of State Antony Blinken said the America and European states were looking at potential bans on Russian oil in response to its unprovoked invasion of Ukraine. It had settled back to to $125 later in the morning.
Benchmark gas prices jumped 79% to €345 euros per megawatt-hour after. This follows a doubling of prices last week.
Russian gas exports, which make up about 30% of European demand, are currently not covered by sanctions.
“The current backdrop is also stoking stagflation concerns, with rising inflationary pressure unlikely to be offset by sufficient global economic growth to prevent a stagnant environment,” said Richard Hunter at Interactive Investor.
“This in turn has led to one of the few positive possible outcomes from the conflict, namely that central banks may need to consider reining in their increasingly hawkish attitudes to interest rates in light of a further blow to global economic recovery.”
“China has also taken a red pen to its estimates, cutting its economic growth target to around 5.5% for next year, while also increasing its military spending by 7.1%, both in recognition of the unfortunate direction which is currently playing out.”
In equity news, Russian gold miner Polymetal rebounded from last week’s hammering to gain 19%, but the London Stock Exchange had cancelled some trades in the stock due to excessive price spikes.
Miners Glencore, BHP, Antofagasta and Anglo American made strong gains on higher metals prices.
On the downside the war in Ukraine continued to hit airline stocks, with Wizz Air and easyJet both down by more than 11% as they braced for higher fuel costs and lower passenger numbers.
