European shares slumped at the open on Tuesday as Russia continued to ratchet up tensions with the West by ordering troops into breakaway parts of eastern Ukraine.
The pan-European STOXX 600 index fell 1.57% in early deals with all major regional bourses lower. In the year-to-date the benchmark index is down 8%.
Germany’s DAX was down 2% as investors fretted about the country’s heavy reliance on Russian gas supplies.
There was also a shift from equities to commodities, such as gold, and government bonds as the US and its European allies got ready to hit Russia with new sanctions.
Oil prices also soared on prospects of supply disruption, with the Brent crude trading at $97.67 a barrel – its highest since September 2014.
“Gold has broken above key resistance turned support at $1900 towards levels not seen since January 2021. Not only have Putin’s actions increased the risk of the biggest war since 1945 but they have also exacerbated the inflationary problem by pushing energy prices higher, exacerbating one of the market’s biggest worries this year,” said Victoria Scholar, head of investment at Interactive Investor.
“If the uncertainty between Russia and Ukraine continues with no prospect of de-escalation, safe havens like gold should remain well supported with the potential for a move to test the next resistance at $2000 for gold.”
In equity news, medical equipment manufacturer Smith & Nephew rose as full-year operating profits doubled in 2021, partly driven by a solid performance in its sports medicine and ENT and advanced wound management units.
