By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- New, tougher sanctions on Russia weighed
on European stock markets Wednesday as investors analyzed the
potential consequences of the measures. Spanish stocks, however,
stood out as outperformers after better-than-expected growth data
for the country.
Sanction details: Both the U.S. and the European Union agreed to
expand sanctions on Russia late Tuesday, with the new restrictions
targeting the Russian energy, defense, and finance sectors. In the
financial sector, the EU is now curbing access to financing for
state-owned banks in Russia. It will also stop exporting specific
goods and technologies to the country to make it more difficult to
develop oil resources over the longer term.
The U.S. Treasury said it will ban American citizens from buying
new stocks or bonds from three major Russian financial
institutions, limiting their access to U.S. capital markets. The
three banks are Bank of Moscow , Russian Agricultural Bank, and VTB
Bank .
Data: Spain surprised with some better-than-expected
second-quarter economic growth data on Wednesday. The economy
expanded by 0.6% in a three-month period, exceeding an estimate
released last week by the country's central bank and marking the
strongest growth rate in six years.
Meanwhile, more data released Wednesday showed Spanish consumer
prices dropped in July for a second month in a row, stoking fears
of a sustained period of deflation.
Inflation in Germany also dropped, with the EU harmonized
consumer-price index rising 0.8% in July, down from 1% in June.
In France, consumer confidence stagnated in July, staying well
below the long-term average.
U.S. second-quarter GDP data that came out in the afternoon gave
European markets a temporary bump into positive territory, with the
data beating Wall Street estimates. The economy expanded by annual
rate of 4%, the fastest pace since last fall.
Market reactions: Most country-specific indexes were mired in
the red and the Stoxx Europe 600 index fell 0.5% to close 340.44.
France's CAC 40 index lost 1.2% to 4,312.30, and Germany's DAX 30
index gave up 0.6% to 9,593.68. The U.K.'s FTSE 100 index dropped
0.5% to 6,773.44.
Spain's IBEX 35 index climbed 0.3% to 10,937.40 on the back of
the encouraging growth data.
Russia's MICEX index rose 0.9% to 1,382.14, shrugging off the
new sanctions. The benchmark was halted for trade in the afternoon,
but resumed trading at 2:50 p.m. London time, or 9:50 a.m. Eastern
Time.
Naeem Aslam, chief market analyst at AvaTrade, explained that
the European leaders made a clever choice in their measures by
leaving out the gas sector, which helped push up the Russian index.
Read: Relief rally in Russia as gas sector avoids sanctions
Oil stocks blues: Oil companies were the hardest hit sector in
Europe, against a background of uncertainty linked to the Russian
sanctions. Total SA (TOT), down 4.9%, said it's preparing for the
possible impact of the measures. The comments came a day after BP
PLC (BP), down 0.5%, warned that further economic restrictions on
Russia could hurt its business.
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