Russia’s next move in Ukraine in the spotlight

LONDON – European stocks closed lower on Tuesday, with investors’ attention focused on the latest developments in the war between Russia and Ukraine.

The pan-European Stoxx 600 fell 0.7% at the end of the day, with the insurance sector leading losses and energy stocks posting some gains.

In terms of individual stock price movement, Swiss tech company Temenos gained 7%, while at the bottom of the blue-chip European index, Swiss Re fell 7.6%.

Global investors were watching Ukraine closely after the country’s military said Monday that a long-awaited offensive push has begun in the Donbas region of eastern Ukraine, with intensified assaults on the Slobozhansky and Donetsk operating districts in the north and east of the country.

With the conflict showing no signs of ending any time soon, the World Bank has lowered its global growth forecast for 2022 by nearly a full percentage point, from 4.1% to 3.2%, citing the pressure that the invasion of Ukraine by part of Russia has exerted on the world economy.

“I think there will be room for disappointment, if not in the first quarter delivery but in the outlook for the rest of the year, because these headwinds are significant.”

Richard-Mark Dodds

CIO, pure value metrics

On Tuesday, the International Monetary Fund also cut its global growth projections for 2022 and 2023, saying the economic impact of Russia’s invasion of Ukraine “will spread far and wide.”

Markets were also digesting comments from Federal Reserve Bank of St. Louis president and Federal Open Market Committee voting member James Bullard, who said he would not rule out a 75 basis point increase in interest rates this year. .

However, Bullard told CNBC his base case is still consecutive 50 basis point hikes.

“The Fed’s hawkish shift since last November has caused market volatility and there has been a repricing, and I’m very sympathetic to the financial markets,” Bullard said.

“At this point, quite a bit has been priced in, we would be following, and there may be corners of the market that have not yet been adjusted, and would still need to be adjusted.”

On Wall Street, US stocks rose as traders navigate one of the busiest weeks of corporate earnings season.

Before the bell on Tuesday, Johnson & Johnson reported mixed quarterly results. The focus will be on Netflix’s latest earnings to be reported after the bell.

Richard-Mark Dodds, chief investment officer at Pure Value Metrics, told CNBC on Tuesday that while he is optimistic investors could continue to see returns in 2022, they would not come from the same sectors as they have in the last two or three years. Instead, Dodds suggested “defensive” sectors such as commodities, insurance and health care.

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However, he suggested that in light of slowing growth forecasts, rising inflation and interest rates and the war in Ukraine, corporate earnings expectations may be too rosy at present.

“As we go into first quarter earnings, companies themselves are facing rising costs, whether it’s raw materials or wage costs. They’re facing a constrained supply of goods and because QE (quantitative easing) is ending and because of we have core inflation, everyone faces rising interest rates,” Dodds said.

“It’s going to be a tough take on us or US Q1 earnings which are forecast to be up 5% and I think there will be room for disappointment, if not in Q1 delivery but in prospects for the rest of the year, because these headwinds are significant.

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