European Stocks Lower; More Russian Sanctions, Aggressive Fed Weigh
European stock markets traded lower Wednesday, weighed by the likely imposition of new Western sanctions on Russia as well as concerns of aggressive monetary tightening by the U.S. Federal Reserve.
By 3:40 AM ET (0740 GMT), the DAX in Germany traded 0.5% lower, the CAC 40 in France fell 0.5% while U.K.’s FTSE 100 dropped 0.1%.
The United States and Europe are set to announce later Wednesday new sanctions to punish Moscow over alleged atrocities in Ukraine, something Ukraine President Volodymyr Zelensky described as "war crimes" in a speech to the United Nations security council.
The European Commission has already proposed new sanctions including banning Russian coal imports and halting trade worth nearly 20 billion euros ($22 billion), and the White House said late Tuesday that its new measures will target Russian banks and officials and ban investment in Russia.
Russia’s invasion of Ukraine and the sanctions already levied by the West as punishment have roiled markets, causing sharp rises in commodity prices, prompting fears of sharply slower growth this year.
German factory orders fell 2.2% on the month in February in the runup to Russia’s invasion of Ukraine, falling for the first time in four months and underscoring concerns over weaker growth in Europe’s largest economy.
Also, dragging on the European markets are set to receive a negative handover from Asia and Wall Street after comments from Fed Governor Lael Brainard raised expectations of aggressive interest rate rises by the U.S. central bank, added to by hawkish comments from Fed Governor Lael Brainard, normally seen as one of the more dovish members of the central bank policymakers.
This puts the focus firmly on the release later Wednesday of minutes from the Fed's last policy meeting, with investors looking for clues over the likelihood of a 50 basis point hike at the U.S. central bank's next meeting in May.
In corporate news, Volkswagen (DE:VOWG_p) stock fell 2.7% after the German carmaker’s finance chief Arno Antlitz told the Financial Times that the company is likely to ditch many models by the end of the decade to concentrate on producing fewer cars overall but more profitable premium vehicles.
Vestas Wind Systems (CSE:VWS) stock fell 1.4% after the Danish wind turbine said that it would withdraw from Russia, where the firm has two factories.
Oil prices edged higher Wednesday, with traders having to balance supply concerns on the back of likely new sanctions on Russia with fears of weaker demand after a build in U.S. crude inventories and a prolonged COVID lockdown in Shanghai, the Chinese financial hub.
U.S. crude oil supply data from the industry body American Petroleum Institute, released late Tuesday, showed a build of just over 1 million barrels for last week, compared with the 3-million-barrel draw reported the previous week.
Investors now await official numbers from the U.S. Energy Information Administration later in the session for confirmation.
By 3:40 AM ET, U.S. crude futures traded 0.9% higher at $102.86 a barrel, while the Brent contract rose 1% to $107.67.
Additionally, gold futures fell 0.4% to $1,919.50/oz, while EUR/USD traded 0.1% lower at 1.0891.
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