European stocks slip after Ukraine issues state of emergency

By Sruthi Shankar and Shashank Nayar

(Reuters) -European stocks ended lower on Wednesday as concerning headlines regarding the Russia-Ukraine conflict dampened sentiment, while modest Western sanctions on Russia and strong corporate earnings updates helped limit further losses.

The pan-European STOXX 600 index slipped 0.3%, after it firmed 1% in early trading with banks, financial services firms and retailers leading declines.

Ukraine declared a state of emergency on Wednesday and told its citizens in Russia to flee, while Moscow began evacuating its Kyiv embassy in the latest ominous signs for Ukrainians who fear an all-out Russian military onslaught.

Ukraine also blamed Russia for a string of cyberattacks as its state websites, including the government and foreign ministry home pages, remained inaccessible.

“This change of tone perfectly encapsulates the clear and present danger of headline risk with respect to market ebb and flow, as investors nervously eye Russia’s next move,” said Michael Hewson, chief analyst at CMC Markets.

Investors also raised concerns that sanctions imposed by Western nations on Russia could hamper oil supplies leading to more energy price pressures.

“The main market implication of these heightened tensions is that energy prices have become stickier at a higher level, increasing stagflation risks…the longer energy prices stay elevated or continue to rise, the more this will chip away at growth and incrementally add to inflationary pressures,” said Andrea Cicione, a strategist at TS Lombard.

Western nations and Japan punished Moscow with new sanctions for ordering troops into separatist regions of eastern Ukraine, leaving investors with hopes that a war on Europe’s eastern flank can be avoided.

Automakers rose 0.7% and it was the second highest gaining sub-index as Stellantis surged 4.4% after it said the margin on its adjusted operating profit climbed above its target in the first year after the merger of Fiat Chrysler and Peugeot maker PSA.

Of the more than half of STOXX 600 companies that have reported so far, 63% have topped analysts’ profit estimates, as per Refinitiv IBES data. In a typical quarter, 52% beat estimates.

French yoghurt maker Danone added 4.4% after reporting stronger-than-expected sales growth in the last quarter of 2021.

Barclays gained 3.1% after its annual profit nearly trebled and the British lender returned 2.5 billion pounds ($3.40 billion) to shareholders in 2021.

Dutch-based coffee company JDE Peet’s, Belgian insurer Ageas and British student housing provider Unite Group all were among the top STOXX 600 gainers after strong earnings.

Germany-based online broker FlatexDEGIRO shot up 16.7% after a report the company is attracting interest from private equity firms.

Meanwhile, Sweden-based Storskogen dropped 17% and was the worst performer after it missed Q4 estimates.

($1 = 0.7378 pounds)

(Reporting by Sruthi Shankar in Bengaluru; Editing by Shounak Dasgupta and Amy Caren Daniel)