By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- European stock markets posted sharp
losses on Monday after tensions in Ukraine escalated over the
weekend, when Russia's President Vladimir Putin got parliamentary
approval to use armed forces in the country.
The Stoxx Europe 600 index slumped 2% to 331.22, setting it on
track for the lowest close since mid-February.
With the slide, the first trading day of March already looks
very different from February, when risk gradually returned to the
stock markets after uncertainty over emerging markets eased.
Europe's benchmark index ended February with the largest percentage
gain since July last year, posting a 4.8% monthly advance.
Russia and Ukraine were the main focus in Monday's trade as the
crisis between the two countries escalated, with the U.S. and its
allies confronting Russia about its latest move to occupy the
country. Western powers threatened on Sunday to isolate Putin and
punish his nation's economy, demanding Russia withdraws its forces
from Ukraine's Crimean region. Tensions remained on Monday, and the
Ukrainian State Border Service said in a statement that "Russian
special forces have taken control of several border units using
brutal physical force and threat of arms and fear-mongering."
U.S. Secretary of State John Kerry made plans to visit Kiev on
Tuesday to show support for the country's interim government.
Russia's MICEX index tanked 12% to 1,272.61. Meanwhile, the
ruble (USDRUB) dropped to a record low against the dollar and euro,
after Russia's central bank unexpectedly raised its interest rate
to 7% from 5.5% in response to recent "increased volatility" in
financial markets. In Ukraine, the UX index gave up 12.1% to
984.00.
Billionaire investor Warren Buffett said on CNBC, however, he
wouldn't sell shares because of the conflict, but, if anything, use
it as a buying opportunity.
In Europe, economic data were largely overshadowed by the
political jitters. The final euro-zone manufacturing purchasing
managers index for February came in at 53.2, better than the
"flash" estimate of 53, but below January's 54.
France's manufacturing PMI climbed to a five-month high of 49.7,
almost moving above the 50-level that separates expansion from
contraction.
The CAC 40 index traded 2.4% lower at 4,302.40, mainly due to
the Ukraine concerns. Germany's DAX 30 index slumped 2.8% to
9,420.35, and the U.K.'s FTSE 100 index dropped 1.8% to
6,691.11.
Banks posted some of the biggest losses in indexes. Shares of
Société Générale SA gave up 6.7% in Paris, Commerzbank AG lost 5.6%
in Frankfurt, and heavyweight HSBC Holdings PLC (HSBC) fell
1.2%.
Investors more broadly also sold other companies with exposure
to the Russian market. Metro AG dropped 6.9%, Nokian Renkaat Oyj
lost 6.7% and Carlsberg AS gave up 6.1%. Carlsberg shares were also
cut to hold from buy by Berenberg.
More must-reads from MarketWatch:
The red flags the West ignored about Putin's Russia
Winter storm 'Titan' hits Midwest with ice and snow
Subscribe to WSJ: http://online.wsj.com?mod=djnwires