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LESSON LEARNT: DIVERSIFICATION (1200 GMT)
While the risk-off wave sparked by Russia's invasion of Ukraine shows no sign of abating, Russian stocks suffered the most painful move, in a clear reminder of why diversification matters, especially for domestically focused investors.
"Even if you think that your home country's stock market will outperform all international markets (and many investors do think this way, regardless of the makeup of their home market), diversification is one of the few ways that you can protect yourself against the risk that your home market will experience an extreme shock," wrote Justin Waring, strategists at UBS Financial Services.
On day one, when Russian troops crossed the border with Ukraine, the Russian RTS <.IRTS > equity index fell 38%, marking the biggest one-day drop that any major market has experienced in the last 40 years, per UBS.
"The collapse of the Russian stock market is a reminder of why global diversification is so valuable: It helps you to make sure you have at have some exposure to the winners, but not too much exposure to the losers," Waring also said.
(Danilo Masoni)
"SIGNIFICANT UPSIDE" FOR EUROPE'S ENERGY SECTOR (1125 GMT)
Reports that Europe and the United States were considering an import ban on Russian oil sent crude prices to their highest level since 2008 on Monday.
Analysts at Bernstein say that elevated oil and gas prices could end up leading to higher payouts from energy companies and they see "significant upside" for the sector.
Using 9-month forward pricing of around $100/bbl Brent and $50/mmbtu European gas, the companies in the European Integrated Energy sector will generate an average free cash flow yield of 24.2%, Bernstein says, which would support further distribution hikes throughout 2022 as payout formulas are "ratcheted up or are increased".
"Our current price targets have an average upside of +32% for the group and an average +41% for our outperforms using a still conservative commodity price deck of mark-to-market prices for 1Q and $73/bbl and $10/mmbtu European gas prices for the remainder of the year," Bernstein says.
The oil and gas sector is a notable outperformer in Europe on Monday, one of only two sectors in the black, alongside basic resources.
The STOXX Europe Oil and Gas Index trades higher on the day by 4.5%, compared to a 2.1% decline for the pan-European STOXX 600.
STAGFLATION CONCERNS SEND EUROPEAN STOCKS TO ONE-YEAR LOW (0910 GMT)
European shares are falling sharply amid growing inflation fears as the risk of U.S. and Europe ban on Russian oil and delays in Iranian talks sent oil prices to the highest level since 2008 hammering economic growth prospects.
The STOXX 600 index slides to its lowest since end of Feb last year, last down 2.7%. Banks, retailers and auto sector are leading the losses, all down 4-5%.
The only sectors in positive territory is not surprisingly oil and gas and miners.
France's CAC, Sprain's IBEX, Italy's FTSE MIB and Germany Dax are all down more than 3%.
(Joice Alves)
OIL SHOCK (0800 GMT)
Oil's relentless climb, hitting almost $140 on Monday, means another turbulent start to the week for world markets.
The United States and European allies are exploring banning imports of Russian oil, U.S. Secretary of State Antony Blinken said on Sunday.
That sent Brent crude oil to its highest since 2008. Up some 30% since Russia invaded Ukraine on Feb. 24, the surge deals another shock to global price pressures already at their highest levels in decades.
European stock futures have dived more than 2%, U.S. equivalents are deep in the red, while in Asia, Japan's blue-chip Nikkei sank to a 15-month low and was last down around 3%.
The euro too is reeling by the fresh surge in oil prices. It hit a new 22-month low against the dollar and briefly fell below parity to the Swiss franc for the first time since January 2015 -- when Switzerland abandoned its currency peg against the euro.
The single currency appears increasingly correlated with the oil prices -- the higher oil climbs, the lower the euro descends -- as higher inflation and the blow to the economy higher energy prices threaten to squeeze consumption.
According to a note from Goldman Sachs, a sustained $20 oil rise shock will lower real economic growth in the euro area by 0.6% and by 0.3% in the United States.
European Central Bank policy makers meeting later this week have reason to be worried. So do other major central banks, and investors will be looking for any signs of a shift from policymakers speaking in the days ahead. Key developments that should provide more direction to markets on Monday: - Russia to open humanitarian corridors to Ukrainian cities -Gold above $2,000 on safe-haven appeal; nickel up over 20% - Jon Cunliffe, deputy governor of Bank of England, in hearing in parliament - China's export growth slows, Ukraine crisis poses risk - UK house prices rocket at fastest rate since 2007: Halifax - German industrial orders rise in January on robust foreign demand - Euro zone sentix index
(Dhara Ranasinghe)
EUROPEAN FUTURES DOWN AROUND 2-3% (0710 GMT)
European futures point to sharp declines for bourses across the region as the risk of a U.S. and European ban on Russian oil and delays in Iranian talks triggered stagflation fears for world markets as the war in Ukraine continues.
European futures are all in negative territory: Eurostoxx 50 futures, DAX futures and FTSE futures down between 2-3%
U.S. Secretary of State Antony Blinken said on Sunday that the U.S. and European allies are exploring banning imports of Russian oil.
Delays in the potential return of Iranian crude to global markets also added pressure on oil prices, which soared to their highest since 2008.
(Joice Alves)