EUROPE MARKETS: European Stocks Slump As Ukraine Crisis Deepens

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 2.3% to close at 330.36, ending at the lowest level 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.

Ukraine-Russia tensions stoke market slide

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 11% to 1,288.81. 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.% to 987.96, according to the Ukrainian Exchange website.

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.

Europe data

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 data came ahead of the European Central Bank's policy-setting meeting on Thursday, where economists are speculating whether the bank will act following five months with inflation below 1%. International Monetary Fund chief Christine Lagarde on Monday warned that a longer period with low inflation bears the risk of derailing the euro zone's already fragile economy. To fight this, she urged the ECB to launch "even further accommodative policies and targeted measures."

European Central Bank President Mario Draghi also addressed the concerns about weak inflation and said the longer it stays at low levels, the harder it will be to get to target, according to Reuters.

The major European indexes all moved sharply lower, mainly due to the Ukraine concerns. The CAC 40 index closed 2.7% lower at 4,290.87. Germany's DAX 30 index slumped 3.4% to 9,358.89, and the U.K.'s FTSE 100 index dropped 1.5% to 6,708.35.

Banks posted some of the biggest losses in indexes. Shares of Société Générale SA gave up 5.4% in Paris, Commerzbank AG lost 6.1% in Frankfurt, and heavyweight HSBC Holdings PLC (HSBC) fell 1.1%.

Investors more broadly also sold other companies with exposure to the Russian market. Metro AG dropped 5.4%, Nokian Renkaat Oyj lost 6.6% and Carlsberg AS gave up 5.3%. Carlsberg shares were also cut to hold from buy by Berenberg.

Precious-metals miners, however, benefited from the flight out of riskier assets, as investors instead rushed into safe havens, which boosted the price of gold and silver. Randgold Resources Ltd. jumped 4.3%, and Fresnillo PLC picked up 1.9%.

In the U.S., stocks also moved lower, with the S&P 500 index (SPX) sliding from its 48th record close for the past year on Friday. Better-than-expected consumer and manufacturing data provided little relief for the downbeat sentiment.

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