LONDON — European stocks on Monday fell to two-month lows as global investors fled risk assets en masse due to fears over inflation.
The pan-European Stoxx 600 provisionally ended down 2.8%, hitting its lowest level since Mar. 8. Travel and tech shares led the losses, down 5.8% and 4.8% respectively, as all sectors and major bourses traded firmly in negative territory.
The risk aversion for European markets comes after regional stocks retreated at the end of the last trading week on the back of a rout in U.S. markets, with Wall Street posting its worst day since 2020 last Thursday.
U.S. stocks fell sharply Monday, pushing the S&P 500 to a fresh 52-week low, as traders struggled to find their footing after a dramatic week of trading stateside. Shares in Asia-Pacific also retreated on Monday.
“Even the volatility of volatility is on the rise. The Vix index, which tracks expected volatility of the S&P 500, dropped a fifth in the first half of the week before leaping 25 per cent on Thursday. It’s now more than double the five-year average.”
Stuart Kirk
Global Head of Research and Responsible Investments, HSBC
Global markets have been volatile in recent weeks as uncertainty reigns over the outlook for monetary policy, inflation and economic growth.
“Even the volatility of volatility is on the rise. The Vix index, which tracks expected volatility of the S&P 500, dropped a fifth in the first half of the week before leaping 25 per cent on Thursday. It’s now more than double the five-year average,” said Stuart Kirk, HSBC global head of research and responsible investments.
Investors are also keeping an eye on the war in Ukraine as dozens are feared dead after a school in the Luhansk region in eastern Ukraine was hit by Russian shelling. Luhansk is one of the two regions that make up the Donbas, where Russian troops are now largely concentrating their attacks.
Russia was also under scrutiny on Monday, as it held its “Victory Day” — a holiday commemorating the Soviet Union’s defeat of Nazi Germany in World War II.
In his speech, President Vladimir Putin attempted to justify his unprecedented invasion of Ukraine by claiming without evidence that the West was “preparing for the invasion of our land, including Crimea,” according to a Reuters translation.
U.S. first lady Jill Biden made a surprise visit to Ukraine on Sunday. The U.S. and Group of Seven countries announced that they would increase short-term financial support for Ukraine as the war with Russia nears the three-month mark.
Also weighing on investor sentiment are continued coronavirus lockdowns in China. In oil markets, international benchmark Brent crude futures sank 5.2% to $106.52 a barrel while U.S. light crude futures fell 5.6% to $103.61. China is the world’s largest oil importer.
In terms of individual share price movement in Europe, German food delivery company Delivery Hero slumped 13% to the bottom of the Stoxx 600.
British advertising agency S4 Capital plunged 11% after being forced to cut its earnings outlook after an auditing issue forced a delay to the publication of its full-year results.
— CNBC’s Jesse Pound contributed to this market report.