Stay informed with free updates
Simply sign up to the Equities myFT Digest — delivered directly to your inbox.
European stocks fell and government bonds gained on Tuesday as investors responded to the latest escalation of the war in Ukraine.
The pan-continental Stoxx Europe 600 index finished 0.5 per cent lower. Germany’s Dax and the Cac 40 in Paris both lost 0.7 per cent.
On Wall Street, the S&P 500 erased most of its early losses to rise 0.1 per cent by mid-morning. Nvidia, one of the world’s most valuable companies owing to its dominance of the AI processor market, boosted the technology-heavy Nasdaq as it climbed 3 per cent ahead of an earnings release on Wednesday. Other technology giants, including Amazon and Apple, rose 1 per cent. The Nasdaq added 0.6 per cent.
The moves in Europe came after Ukraine struck a military target inside Russia with US-made long-range missiles for the first time since the Biden administration lifted restrictions on their use. Further unnerving investors on Tuesday, Russian President Vladimir Putin signed a decree lowering the potential threshold for the use of nuclear weapons.
“This is classic risk-off where people are flying to safety,” said Emmanuel Cau, head of European equity strategy at Barclays. “It is very much about [escalation] worries.”
Sectors such as retail and banking, which are sensitive to concerns about the economy, were a drag on European indices. However, defence stocks rose; shares in Saab of Sweden and Rheinmetall of Germany were up more than 3.6 and 3.9 per cent respectively.
Assets seen as a haven in geopolitical turbulence also strengthened. The Japanese yen climbed 0.4 per cent to ¥154 to the dollar while the Swiss franc rose 0.1 per cent to SFr1.13 against the US currency. The dollar, which has rallied since the US election, traded flat against a basket of rival currencies on Tuesday evening.
Gold was up 0.7 per cent to $2,630 per troy ounce, regaining some ground lost in a sell-off after the election. Bitcoin, which some traders see as a digital version of gold, rose 2 per cent to trade just under its all-time high of $93,400 per coin.
While US stock markets rallied in the wake of the US presidential election, European shares have fallen as investors bet that president-elect Donald Trump’s plans for tariffs will hurt the European economy.
Andrew Pease, global head of investment strategy at Russell Investments, said the renewed Ukraine worries had “added to the sense of geopolitical unease ahead of the Trump transition”.
In bond markets, the yield on benchmark 10-year US Treasuries fell 0.04 percentage points to 4.37 per cent while German yields also declined. Yields fall when prices rise.