EUROPE MARKETS: European Losses Deepen As Ukraine Crisis Intensifies

By Sara Sjolin, MarketWatch

LONDON (MarketWatch)--European stock markets ended sharply lower on Thursday after the Ukraine-Russia conflict intensified, with a passenger jet reportedly downed over Ukrainian airspace.

The Stoxx Europe 600 index slid 0.9% to close at 339.74, after posting the biggest one-day percentage gain since April on Wednesday.

Among notable movers in the pan-European index, shares of Banco Espírito Santo SA slumped 7.9% after Standard & Poor's Ratings Services late Wednesday lowered the lender's rating to B- from B+ and said it was keeping the long-term rating on negative watch. BES shares soared 20% on Wednesday after the governor of the Bank of Portugal said shareholders are ready to participate in a capital increase, amid financial troubles at parent company Espirito Santo International.

Russia sanctions

More broadly, European markets were hurt by escalating tensions between Russia and Ukraine. A Ukrainian security spokesman said Russia late Wednesday shot down an Air Force fighter jet with an air-to-air missile. He also said Ukrainian troops had been fired upon by missiles from a village just inside Russia. Pro-Russia rebels claimed responsibility for strikes on two Ukrainian Sukhoi-25 jets, media reports said.

Additionally, just before the European markets closed, media reports said a Malaysia Airline jet en route to Kuala Lumpur from Amsterdam was shot down over Ukrainian airspace, with almost 300 passengers on board. U.S. stocks extended losses on the reports.

The moves came as the U.S. and the European Union on Wednesday each announced a new round of sanctions on Russia. The U.S. is restricting access to the American debt market for some Russian banks, energy companies and defense firms, while the EU said it would announce detailed sanctions by the end of July.

Russia's MICEX index slumped 2.3% to 1,440.63 on Thursday.

State oil producer Rosneft was named as one of the sanctioned firms, which sent the shares down 4.3% in Thursday's trade.

Jim O'Neill, the economist who coined the term "BRIC" and a former chairman of Goldman Sachs Asset Management, told CNBC on Thursday that it's easy for the U.S. to make a noise with sanctions, because there's not as much on the line as for Europe.

"For some parts of Europe, Germany and Italy in particular, it's a big deal," he said.

Germany's DAX 30 index fell 1.1% to 9,753.88, while France's CAC 40 index lost 1.2% to 4,316.12. The U.K.'s FTSE 100 index dropped 0.7% to 6,738.32.

Among movers in Europe, shares of SAP SE (SAP) climbed 2.4% after the German software company raised its full-year revenue outlook for cloud applications.

Shares of Sandvik AB gave up 4.1% after the Swedish engineering group reported a drop in second-quarter profit.

Bucking the negative trend, shares of ITV PLC rallied 6.2% after news that Liberty Global PLC (LBTYA) is buying a 6.4% stake in the U.K. broadcaster for 481 million pounds ($824.18 million).

In data news, the final reading on euro-zone inflation for June confirmed that consumer prices rose a meager 0.5% last month. Additionally, Eurostat said construction output across the euro zone fell by 1.5% in May, another sign the currency area's economic recovery remains weak

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