European stock markets opened higher on Tuesday, clawing back losses after Monday’s rout.
In London, the FTSE 100 (^FTSE) rose 0.6% after opening, after posting its biggest one day fall since 26 November, while the CAC (^FCHI) jumped 1.1% in Paris, and the Frankfurt DAX (^GDAXI) was 0.8% higher.
The declines in European markets on Monday came due to events on the Russia-Ukraine border rather than any other factors that have dominated sentiment over the past two weeks.
“It appears that the penny has finally dropped with financial markets that events in eastern Europe have the potential to get even worse, after NATO announced it is putting additional ships and aircraft on standby for mobilisation, and that the US is considering sending troops to shore up its Baltic defences, in response to requests from the likes of Estonia for a greater US presence to deter a potential Russian escalation,” Michael Hewson of CMC Markets said.
Elsewhere, the UK government borrowed £16.8bn ($22.7bn) in December, a rise from £16.6bn in November, but less than economists had expected.
According to the Office for National Statistics (ONS), this was the fourth-highest December borrowing since the monthly record began in 1993.
However, it was £7.6bn less than in December 2020, when the county entered its second national lockdown, thanks to improved tax revenues and savings in public spending.
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Across the pond, S&P 500 futures (ES=F) were down 1.2%, Dow futures (YM=F) shed 0.7%, and Nasdaq futures (NQ=F) were 1.6% lower as trade began in Europe.
On Monday, the Nasdaq plunged as much as 5% at one point during the session, and the S&P500 slipped into correction territory, before a wave of bargain hunters piled in to leave each of the major indices finishing marginally ahead.
“This volatility is likely to prevail for the moment, with tensions between Russia and Ukraine unsettling investor sentiment and with the imminent Federal Reserve meeting likely to have a major impact on the short term direction,” Richard Hunter, head of markets at Interactive Investor, said.”
“An increasingly hawkish Federal Reserve is expected to be confirmed with a wind down of easing and an indication of interest rate hikes largely expected.
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“At the same time, the persistently high level of inflation at present has led some observers to wonder whether the Fed is actually behind the curve, and whether any monetary tightening could be even more harsh than anticipated.”
The sharp rebound at the end of the session still left the major indices down in the year to date, with the Dow Jones now having lost 5.4%, the S&P500 7.5% and the Nasdaq 11.4%.
Asian markets also tumbled overnight after the volatile day for Wall Street, fuelled by fears about the Federal Reserve’s plans to hike interest rates.
In Japan, the Nikkei (^N225) fell 1.6% while the Hang Seng (^HSI) fell 1.9% in Hong Kong, and the Shanghai Composite (000001.SS) slumped 2.6%
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