(Bloomberg) -- European equities declined for a third day, with the benchmark hitting the lowest level in more than three months amid concerns about an escalation of Russia’s war in Ukraine.
The Stoxx Europe 600 Index fell 0.4% to close at the lowest level since Aug. 12. Most industry sectors were in the red, with automakers and banks leading the decline. Italian shares underperformed, dragged down by the country’s biggest lenders. Defense stocks jumped, with Germany’s Rheinmetall AG gaining more than 3%.
Stocks turned negative after President Vladimir Putin approved an updated nuclear doctrine that allows Russia to expand its use of atomic weapons, days after the US gave Ukraine limited permission for long-range missile strikes on Russian territory. Government bonds rose along with other haven assets.
The benchmark index extended declines after news that the Ukrainian armed forces carried out their first strike in Russian territory with the ATACMS missile and Russia condemned the move. Selling pressure eased somewhat after the US indicated it wouldn’t respond to Russia’s change of stance.
“It’s clearly not good at all,” Andrea Tueni, head of sales trading at Saxo Banque France. “The situation can get worse before it gets better in the weeks to come, so it’s really something for investors to keep in mind.”
Meanwhile, concerns about potential tariffs and other policies that Donald Trump may impose during his second term in the White House have put pressure on European equities, which have posted four straight weeks of declines. A surging dollar, China’s economic slowdown and the region’s own anemic economy are also adding to pressures.
David Kruk, head of trading at La Financiere de L’Echiquier in Paris, said while it made sense for traders to be concerned about the geopolitical developments, all eyes were still on the upcoming results of US chipmaker Nvidia Corp. on Wednesday. “No-ne wants to take big directional positions before Nvidia’s results are known,” he said.
Among individual movers, Siemens AG shares dropped after Bank of America downgraded its rating to neutral. Nestle SA also declined as investors’ regard the Swiss foodmaker’s updated guidance as still too ambitious after its troubled year.
For more on equity markets:
- Trump Effect Is Clouding Europe’s Profit Outlook: Taking Stock
- M&A Watch Europe: Mulberry, Vivendi, Pandox, Spie, Talabat
- Newly-Listed Springer Nature Faces Earnings Test: ECM Watch
- Stocks Fall at Open, Jolted by Flare-Up in Ukraine-Russia War
- November Rains on UK House Prices: The London Rush
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--With assistance from Michael Msika.
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