Europe: US ban on Russian oil spooks stocks

[BENGALURU] European shares slipped on Tuesday, as the United States banned Russian oil imports, raising volatility and fears of global stagflation, and offsetting a recovery in financial stocks.

The region-wide Stoxx 600 index ended a choppy session down 0.5 per cent with technology, healthcare and the materials sector weighing.

London's FTSE and the German DAX were flat, while the bank-heavy indices of Spain and Italy outperformed, rising 1.8 per cent and 0.8 per cent, respectively.

President Joe Biden announced a US ban on Russian oil and other energy imports, ramping up a campaign against Moscow in retaliation for its invasion of Ukraine, while Britain said it would phase out imports of Russian oil and oil products by the end of 2022.

The European Union has so far refrained from a ban on imports given its dependence on Russian gas and oil and the possible inflation repurcussions.

While markets had priced in the bans to an extent, the crisis is fuelling worries about slower economic growth coupled with higher commodity prices and inflation, Julien Lafargue, chief market strategist at Barclays Private Bank, said.

Fears of a severe supply crunch sent crude prices soaring past US$132 per barrel, boosting London-listed oil majors BP and Shell up 5.1 per cent and 3.0 per cent respectively.

Germany's DAX and Italy's MIB were confirmed as being in a bear market, or a decline of 20 per cent or more from the most recent closing highs, on the prospect of a Russian oil import ban.

The Stoxx 600 is down almost 15 per cent so far this year, slipping from January's record highs as the Ukraine crisis has escalated.

"If there is a further escalation in terms of sanctions and you have an actual stopping in physical supply of gas to Europe, you can even be faced with rolling blackouts in the industrial sector," said Davide Oneglia, senior economist at TS Lombard.

Euro zone banks closed 2.5 per cent higher after hitting a one-year low in the previous session.

Most euro zone sovereign bond yields soared and a key gauge of market inflation expectations jumped to its highest level since late 2013 amid unease over rising price pressures two days before a European Central Bank meeting.

Telecom Italia gained 5.9 per cent after an Italian newspaper reported that US fund KKR was still interested in a takeover, albeit at a lower price.

British insurer and asset manager M&G jumped 15.0 per cent after announcing a £500 million (S$893.7 million) share buyback programme. REUTERS