Europe: Stocks cut losses after Russia-Ukraine ceasefire talks

[BENGALURU] European stocks cut almost all session losses on Monday as Russia and Ukraine held ceasefire talks, while euro zone banks slumped as they braced for impacts from tough new sanctions on Russia.

The pan-European Stoxx 600 ended 0.1 per cent lower after having fallen nearly 2 per cent in the session, as investors bought defensive and technology names. On the month, the index lost 3.4 per cent, and is off about 9 per cent from its record high hit in January.

Officials from Russia and Ukraine ended peace talks on Monday and will return to their respective capitals for further consultations before a second round of negotiations, RIA news agency reported.

Markets were roiled after Moscow put its nuclear deterrent on high alert in the face of a barrage of Western reprisals, over its invasion of Ukraine, that included blocking big Russian banks from the Swift global payments system.

"The lack of any obvious progress in the Russia-Ukraine ceasefire talks has not provoked any further selling," said Chris Beauchamp, chief market analyst at online trading platform IG.

"It looks like a major escalation in the conflict would be required to prompt a further leg down."

Euro zone banks, slumped 5.7 per cent with lenders most exposed to Russia, including Austria's Raiffeisen Bank, UniCredit and Societe Generale, plunging between 9.5 per cent and 14 per cent.

"The fall in markets that we have seen already has wiped out the profits, particularly if you look at the French banks with Russian exposure, they fell this morning by more than the turnover that they have in Russia as a percentage of the company turnover," said Jonathan Bell, chief investment officer at Stanhope Capital.

Euro zone money markets further scaled back expectations for rate hikes from the European Central Bank, with traders now pricing in a total of 30 basis points (bps) by year-end, from roughly 35 bps late last week.

Goldman Sachs forecast European headline inflation to rise sharply to 5 per cent in 2022 and said the crisis could shave off as much as 0.4 per cent of euro area GDP this year.

London-listed energy major BP slid 4.0 per cent after the biggest foreign investor in Russia said it was abandoning its stake in state oil company Rosneft at a cost of up to US$25 billion.

France's Renault, which controls Russian carmaker Avtovaz, skid 6.6 per cent Defence company Rheinmetall soared 24.8 per cent after German Chancellor Olaf Scholz said the country would sharply increase its spending on defence to more than 2 per cent of its economic output.

French defence group Thales, Italy's Leonardo and UK's BAE Systems gained between 10.2 per cent and 15 per cent.

Renewable energy companies such as Vestas Wind and Orsted jumped more than 10 per cent on growing bets of a shift away from Russian gas supplies. REUTERS