Paris loose 2.83%, Frankfurt 2.93% and Milan 4.20%, while investors expected a more flexible tone from the ECB. London ended down 1.54% and Zurich fell 0.89%.
The rebound of the day before was short-lived: Western stock markets took a nosedive again on Thursday in the face of the lack of diplomatic progress on a ceasefire in Ukraine, the acceleration of US inflation and the normalization of monetary policy in the euro zone.
After a fleeting respite on Wednesday which followed a prolonged period of decline, the European indices faltered again: Paris lost 2.83%, Frankfurt 2.93% and Milan 4.20%, while investors expected to a softer tone from the European Central Bank (ECB). London ended down 1.54%. In Zurich, the SMI lost 0.89%.
The failure of the heads of Russian and Ukrainian diplomacy to agree on a ceasefire in Ukraine weighed on the morale of investors.
At the time of the European close, the Dow Jones yielded 1.22%, the Nasdaq index, with a majority of technology, dropped 1.99% and the broader S&P 500 index dropped 1.52%.
US Treasury Secretary Janet Yellen said on Thursday that the United States and its European allies may impose additional sanctions on Russia, citing “atrocities” against civilians that “appear to be intensifying”.
For his part, Russian President Vladimir Putin has warned that Western sanctions targeting his country in connection with Ukraine will aggravate the energy crisis and the inflation of food prices on a global scale.
In the euro zone, while investors were expecting a softening of monetary rhetoric, the ECB decided to accelerate the gradual withdrawal of its debt buybacks in the face of soaring inflation, while allowing itself time to act on the rates.
Another surprise: the ECB no longer asserts, contrary to what it has done so far, that a stop to these debt purchases will be automatically followed by a rise in key rates, which would be the first since 2011.
The increase could, according to the president of the institution Christine Lagarde, as well occur “the following week” as “months later” according to the economic data.
The exercise was tricky as the war in Ukraine gave a new boost to inflation and pushed the central bank to revise its growth expectations downwards to 3.7% for 2022, against 4.2% previously.
ECB experts have revised inflation forecasts for this year sharply upwards, to 5.1% from 3.2%, then to 2.1% in 2023 and 1.9% in 2024.
What degrade the sovereign bond market, where yields were tight.
“The dilemma the ECB now faces is how to control rising inflation and bring it back to target, while ensuring that it does not exacerbate the likely impact of the Ukraine crisis” on the economic recovery, says Lale Akoner, strategist at BNY Mellon Investment Management.
Mining stocks were generally up sharply on the London Stock Exchange, with the exception of companies exposed to Russia such as Polymetal International, which fell 2.86% to 151.25 pence, or steel giant Evraz , of which Russian billionaire Roman Abramovich, targeted by British government sanctions, is the main shareholder. The title was suspended in the middle of the session, when it posted a drop of 12.6% (to 80.89 pence) and 76% since the start of the year.
In Frankfurt, BMW fell 5.51% to 72.00 euros. The manufacturer saw its sales drop 14% year on year in the fourth quarter.
On the side of oil, the euro and bitcoin
Oil prices stabilized on Thursday, Vladimir Putin having assured that Russia was maintaining all its hydrocarbon deliveries, despite Western sanctions.
Around 5:20 p.m. GMT, a barrel of Brent from the North Sea, the benchmark for black gold in Europe, for delivery in May decelerated (+0.70%) to 111.90 dollars.
A barrel of West Texas Intermediate (WTI) for April delivery climbed 0.18% to 108.90 dollars.
European natural gas also relaxed after a record close to 350 euros per megawatt hour on Monday.
The euro yielded 0.68% to 1.1001 dollar.
Bitcoin (-6.23% to 39,248 dollars) yielded a large part of the gains of the day before, acquired after the launch of the site of a “digital dollar”.