Yahoo Finance European markets mixed as Brussels targets Russian coal imports in new sanctions
European markets were mixed on Tuesday as western allies pile further pressure on Moscow after reported Russian atrocities in Bucha, outside Ukrainian capital Kyiv.
The FTSE 100 (^FTSE) rose 0.4% amid talks of more sanctions and higher oil prices. France’s CAC (^FCHI) was 1.5% lower and the DAX (^GDAXI) fell 0.8% in Germany.
The European Union is ready to launch a fifth package of embargoes against Russia, including an import ban on coal worth €4bn ($4,4bn, £3.3bn) per year, a block on transactions with four of its lenders, and the closure of its ports to Russian vessels.
European Commission president Ursula von der Leyen confirmed the new measures, adding that it's also considering targeting oil.
Russia is waging a cruel, ruthless war, also against Ukraine’s civilian population.
We need to sustain utmost pressure at this critical point.
So today we are proposing a 5th package of sanctions. pic.twitter.com/GEuPQf0Wgr— Ursula von der Leyen (@vonderleyen) April 5, 2022
The package announced on Tuesday includes:
New import bans worth €5.5bn on products ranging from wood and cement to seafood and spirits.
A full transaction ban on four key Russian banks, including VTB (VTBR.ME).
A ban on Russian and Russian-operated ships from accessing EU ports.
Further export bans worth €10bn targeting "vulnerable" areas, like quantum computers and advanced semiconductors.
The news of sanctions saw European coal prices jump to a three-week high as the bloc prepares to target Russian imports. Russia supplies about half of the continent's thermal coal, used to fuel its power stations and generate electricity.
Year-ahead futures for coal delivered to northwest Europe rose nearly 8% to $205 a tonne, while US coal soared above $100 a tonne for the first time since 2008.
Read more: UK services firms hike prices at record pace
It comes as the Kremlin's latest sovereign bond coupon payments were halted by the US Treasury on Monday night, pushing the country closer to a historic default if it fails to pay within the grace period. Russia was due to make a principal payment of over $550m (£419m) on a maturing bond as well as an $84m interest payment on Monday.
The move, which prevents Russia from making the payments in dollars through US banks, is designed to force Russia to use up the remaining dollars to which it still has access.
A US Treasury spokesperson said: “Today is the deadline for Russia to make another debt payment. Beginning today, the US Treasury will not permit any dollar debt payments to be made from Russian government accounts at US financial institutions. Russia must choose between draining remaining valuable dollar reserves or new revenue coming in, or default.”
Watch: West plans more Russia sanctions over Ukraine deaths
Oil prices were higher on Tuesday after the US vowed to impose new sanctions on Russia over reports of war crimes in Ukraine.
US national security adviser Jake Sullivan said Washington will announce further measures against Moscow this week, including potential curbs on energy. This came after a call by French president Emmanuel Macron for a ban on imports of Russian oil and coal.
Richard Hunter, head of markets at Interactive Investor, said: “The latest bout of public outrage has strengthened the resolve of western leaders to take further action.
“Even Germany, which has a high reliance on the import of Russian gas, is looking to refrain from further imports.
“Meanwhile, as countries consider actions to offset the loss of energy supplies, prices remain well supported, such as an oil price which has popped again and has now risen by 41% so far this year.”
Brent crude (BZ=F) rose 0.6% to $108.26 a barrel. US light crude (CL=F) was 0.7% higher to $103.99 in electronic trading on the New York Mercantile Exchange at the time of writing.
Across the Atlantic, US benchmarks were opened mixed on Tuesday as investors assess what a fresh round of sanctions from the EU on Russia could mean for markets.
The tech-heavy Nasdaq (^IXIC) led losses, declining 1.4%, while Wall Street’s S&P 500 (^GSPC) lost 21.03 points, or 0.5%, to 4561.61. The Dow Jones (^DJI) drifted 0.1% lower at London's close.
Meanwhile, the yield curve remained inverted as the yield on the two-year Treasury note surpassing the benchmark 10-year yield. The yield on the 10-year US Treasury note rose to 2.465% on Tuesday from 2.409% on Monday, while the two-year note rose to 2.473% from 2.426%.
The uptick in yields heightens expectations that the US Federal Reserve will continue on a hawkish path when it comes to raising rates in its next few meetings, as the central bank looks to tame market inflation expectations.
On Tuesday, Fed governor Lael Brainard fuelled fears about aggressive monetary tightening, hinting at methodical rate hikes and rapid cuts to the central bank's balance sheet, driving shares down further.
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Overseas took their cues from a strong bounce on Wall Street and a surge in Europe. The MSCI’s broadest index of Asia-Pacific (AAXJ) shares excluding Japan was up 2.1%.
Asian stocks were in the green overnight with the Nikkei (^N225) rising 0.2% in Japan, while the Hang Seng (^HSI) edged 1.9% higher in Hong Kong. Markets in mainland China are closed on Tuesday for a holiday.
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