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European stocks edge higher as traders weigh the prospect of more sanctions against Russia

European stocks rose on Tuesday, helped by utilities and energy companies, as investors weighed the prospect of escalating sanctions against Russia, including a possible ban on Russian coal and oil imports.

The European Stoxx 600 index rose by 0.3 percent. The regional gauge’s oil and gas sub-index rose 1 percent, while Brent crude, the international benchmark, rose 0.9 percent.

The London FTSE 100 and the German Dax each lost 0.2 percent. Futures contracts, which track Wall Street’s benchmark S&P 500 and the tech-heavy Nasdaq 100 index, were flat in early European trade.

The moves came after the US and France made a significant claim Escalation of Penalties against Russia following reports of atrocities committed by its forces in Ukraine.

French President Emmanuel Macron called for an import ban on oil and coal from Russia, but did not call for an import ban on Russian natural gas – a vital fuel source for Germany, Italy and some eastern European countries. US President Joe Biden said he would impose “further sanctions” on Russia and called for a trial to assess possible war crimes committed by President Vladimir Putin’s forces in Ukraine.

Tancredi Cordero, founder of Kuros Associates, said that the German economy “in particular will see its average input costs related to energy and raw materials increase significantly, which will hurt the operating margins of most domestic companies”.

“I don’t think there will be a recession [in Germany], it’s too strong an economy,” he added. “But in the short term, Germany will be reduced in terms of institutional investor engagement.”

Barring a full-blown recession, Europe could instead be set for a prolonged period of stagflation, said Florian Ielpo, multi-asset portfolio manager at Lombard Odier Investment Managers, citing a period of simultaneous high inflation and subdued economic growth.

“It’s not necessarily bad for stocks,” he said. “If you’re a company that’s good enough in your market to pass the cost spike to consumers, you probably won’t really suffer when the inflation spike starts, and we’re just getting started.”

In Treasury markets, the yield on the 10-year US Treasury — which moves inversely with its price and serves as a benchmark for the cost of borrowing around the world — rose 0.04 percentage point to 2.45 percent.

German government bonds also came under pressure, with yields on 10-year government bonds increasing by 0.04 percentage points to 0.56 percent. The UK equivalent gilt yield rose 0.06 percentage point to 1.61%.

https://www.ft.com/content/751b216f-542d-4068-a946-9e44eb96598f European stocks edge higher as traders weigh the prospect of more sanctions against Russia

Adam Bradshaw

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