European Shares Open Week Lower Amid Ukraine Tensions, Rate Hike Possibilities

By Scott Kanowsky 

Investing.com -- European stocks fell on Monday, as concerns mounted around the impact of both weekend shelling in Ukraine and aggressive central bank monetary policy actions.

By 04:21 ET (08:21 GMT), the pan-European STOXX 600 dropped 0.68% to touch a one-week low, the DAX in Germany traded lower by 0.23%, the CAC 40 in France fell 0.98%, and U.K.'s FTSE 100 moved down by 0.75%.

The declines come after a stronger-than-expected labor market report in the U.S. on Friday bolstered expectations that the Federal Reserve will continue to hike interest rates in a bid to quell soaring inflation, but potentially at the expense of wider economic activity and corporate incomes.

Meanwhile, Russian president Vladimir Putin is reportedly set to meet with his security council to discuss how to retaliate against Ukrainian forces after they carried out an attack on a major bridge between Russia and Crimea. Other reports say that residential areas of Ukraine's capital Kyiv were hit by explosions on Monday morning, while social media posts suggest the cities of Zaporizhzhia and Dnipro were also hit by missile strikes.

Elsewhere, Asian stocks dropped sharply, although trading volumes were muted due to holidays in Japan and South Korea.

The blue-chip Shanghai Shenzhen CSI 300 index sank 2.21%, while the Shanghai Composite index shed 1.66%. Weighing on these markets were chipmaking stocks, including Anji Microelectronics Tech (SS:688019) and Chengdu Xuguang Electronics (SS:600353), which plummeted as much as 20% and 10% respectively, after the White House unveiled export controls cutting off Chinese companies from certain semiconductor materials made with U.S. equipment.

European chipmakers Infineon Technologies AG (ETR:IFXGn) and BE Semiconductor Industries NV (AS:BESI) also slid in early dealmaking.

The U.S. decision threatens to worsen trade ties between the two largest economies in the world and could have deeper economic implications if China responds.

Sentiment towards China was also worsened by data over the weekend showing the country's services sector shrank in September, amid continued COVID-related disruptions. A recent resurgence in infections has also raised fears over more lockdowns.

Oil prices edged down in the wake of these figures, although they remained supported by an OPEC+ supply cut last week and the looming prospect of further disruptions of key Russian energy flows.

London-traded Brent Oil Futures slumped 0.64% to $97.29 a barrel, while U.S. Crude Oil WTI Futures fell by 0.63% to $92.06 per barrel. Both contracts rallied over 10% last week to a one-month high after the Organization of Petroleum Exporting Countries and its allies announced their biggest supply cut since the 2020 COVID-19 pandemic.

In corporate news, shares in Renault (EPA:RENA) accelerated after Reuters reported Nissan (TYO:7201) is pushing its French alliance partner to lower its stake in the Japanese carmaker, and may be mulling a move to raise funds to repurchase the shares.

Additionally, gold futures moved down by 1.12% to 1,690.15/oz, while EUR/USD exchanged hands at $0.9695.