FX.co ★ European stock market declines sharply after strong gains on Wednesday

On Thursday, major European indices showed a significant decline after rising the day before. Market participants are concerned about the prospects of tougher sanctions against Russia.

At the time of writing, the STOXX Europe 600 index lost 0.22%, dropping to 445.16. The FTSE 100 index plummeted by 0.33%, the CAC 40 index declined by 0.11%, the DAX index slumped by 0.73%, the Spanish IBEX 35 index slid down by 0.85%. The Italian FTSE MIB index showed a slight increase of 0.06%.

The UK stock exchange London Stock Exchange Group's securities soared by 9.8% amid the company's announcement that new sanctions against Russia would have little effect on its operations. In addition, the LSE management reported a more than two-fold increase in pre-tax profits in the past year yesterday.

Deutsche Lufthansa AG lost 5.3% following the management's statement about the impossibility to provide a forecast for the current year due to the military conflict in Eastern Europe and the COVID-19 pandemic. Even the strong financial report of the company failed to support the quotations. Thus, in Q4 2021 Lufthansa reduced its net loss by almost 4 times on a yearly basis.

The capitalization of the Italian telecommunications company Telecom Italia SpA crashed by 14%. In the reporting quarter, the company's net loss amounted to €8.64 billion.

The quotations of the German pharmaceutical manufacturer Merck KGaA rose by 0.4%. According to the company's statement for 2021, it increased its net profit by 54%. In addition, the management of Merck KGaA announced the payment of record-high dividends in 2022 yesterday.

Securities of the German logistics company Kion Group AG increased by 9% after the company published a forecast for the current year that exceeded experts' expectations considerably.

Market participants are focused today on the military conflict between Russia and Ukraine. On Thursday, Russian-Ukrainian negotiations to resolve the crisis are scheduled to take place in the Brest region of Belarus. In addition, traders continue to assess the consequences of Western sanctions against Russia.

Investors also paid attention to the statements of the head of the US Federal Reserve Jerome Powell, made the day before in the US Congress. According to Powell, the US Federal Reserve is planning to raise the key interest rate by 25 basis points during the meeting scheduled for March 15-16. In case of accelerating inflation, the regulator will act more aggressively by raising the benchmark rate by more than 25 basis points.

As for the trading results on Wednesday, European stock indices had reported growth the day before amid oil companies' shares climbed.

By the end of the day, the index of leading companies in the euro area STOXX Europe 600 jumped by 0.9% to 446.33 points. The German DAX gained 0.7%, the French CAC 40 jumped by 1.6%, the FTSE 100 index increased by 1.4%, the Italian FTSE MIB slightly climbed by 0.7%, and the Spanish IBEX 35 was up by 1.6%.

The persistently rising world oil prices are further boosting inflation in Europe. According to preliminary forecasts by Eurostat, last month's inflation accelerated to a record 5.8% year-on-year against 5.1% in January.

On Wednesday, securities of British-Dutch oil and gas company Shell rose by 5.1%, French TotalEnergies climbed by 8.2%, and the multinational corporation British Petroleum soared by 4.8%. The cost of Brent futures with delivery in May reached nearly $114 per barrel yesterday. Major foreign buyers began to boycott Russian oil and look for alternative sources of raw materials against the background of the armed conflict between Russia and Ukraine.

The negative consequences of the Ukrainian conflict were also felt by many carmakers, which faced problems with the supply of components. On Wednesday, the securities of the German manufacturer Porsche dropped by 3.3%, and the Swedish Volvo declined by 0.8%.

Yesterday, the Swedish telecommunications equipment manufacturer Ericsson lost 10.3%. The reason for the sharp collapse of the securities were claims from the US Department of Justice in connection with the company's possible cooperation with the Islamic State, which is banned in Russia.