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Highlights
- European markets experienced declines due to heightened geopolitical tensions.
- Defence stocks such as and showed gains amid the turmoil.
- Safe-haven assets like gold and government bonds gained traction.
European markets faced a downturn on Tuesday following escalating geopolitical tensions, driven by President Vladimir Putin’s revision of Russia’s nuclear doctrine. The adjustment was prompted by Ukraine’s deployment of US-made long-range ATACMS missiles against military targets in Russia’s Bryansk region. This marked the first use of such missiles since their delivery was authorised by US President Joe Biden.
The Stoxx Europe 600 index dropped by 0.5%, reaching its lowest level in over three months. Germany's DAX and France's CAC 40 saw declines of 0.7%, while the FTSE 100 slipped 0.1%. Safe-haven assets gained momentum, with gold rising 0.7% to $2,630 per troy ounce, while government bond prices increased, lowering yields.
Putin’s revised doctrine expanded Russia’s conditions for deploying nuclear weapons, including responses to conventional attacks by adversaries supported by nuclear-armed states. A Kremlin statement clarified that this adjustment also covers attacks on allies such as Belarus. Dmitry Peskov, the Kremlin spokesperson, described the move as a “timely adjustment” to address the current geopolitical climate.
This development added pressure to economically sensitive sectors, with banking and retail stocks leading the declines. Banks saw a 1.4% drop across European markets. On the other hand, defence stocks surged due to the heightened tensions. Germany’s Rheinmetall (ETR:RHM) gained 3.9%, while Sweden’s Saab AB (STO:SAAB B) rose 3.6%.
The missile strikes in Bryansk and Russia’s response further complicated an already fragile geopolitical situation. North Korea’s reported involvement in supporting Russia has amplified concerns among Western nations. The revised nuclear doctrine signals a potential escalation in military posturing, raising alarm across global markets.
Amid this uncertainty, bond markets reflected a flight to safety. German bond yields fell as their prices climbed, showcasing growing demand for lower-risk assets. Similarly, the Swiss franc appreciated by 0.1% against the US dollar, bolstering its position as a preferred safe-haven currency.
The combination of Ukraine’s missile strikes, North Korea’s involvement, and Russia’s updated nuclear stance has intensified global uncertainties. This ripple effect is evident in the European markets, with a tilt toward defensive sectors and a retreat from riskier assets.
