By Carla Mozee, MarketWatch
LONDON (MarketWatch) -- European markets sloughed off losses
Monday in a seesaw trading session during which Russia's foreign
minister said Moscow will defend the economy if it comes up against
another round of sanctions related to the conflict in Ukraine.
Any new measures from the European Union or the United States
will force Russia to "protect our economy, protect our social
sphere, protect our businesses and at the same time draw
conclusions from the actions of our partners on their adequacy,"
Russian Foreign Minister Sergei Lavrov was quoted by Reuters as
saying Monday.
On Saturday, EU leaders agreed to draw up options for new
sanctions within a week if Russia doesn't pull back its
intervention in Ukraine. Read: Ukraine loses ground to rebels.
The comments came as Pro-Russian rebels and Ukrainian forces
were fighting near the Luhansk airport in eastern Ukraine on
Monday, according to the BBC, with the battles talking place before
new round of Russia-Ukraine talks was set to begin. Lavrov said
negotiators should prioritize an "immediate cease-fire" when they
meet in Minsk to talk about the months-long conflict. On Saturday,
Ukrainian President Petro Poroshenko said his country was moving
toward "a point of no return -- full-scale war" against Russia.
Market reaction: The Stoxx Europe 600 had turned lower after
Lavrov's remarks about sanctions, but then bounced back to end with
a gain of 0.3% at 342.86. Germany's DAX 30 index had been lower as
well, but ended the day up 0.1% at 9,479.03. German stocks in
recent weeks have felt the weight of worry among investors about
the German economy and the impact of sanctions on trading partner
Russia.
Trading volumes in European markets were lighter than usual,
with U.S. markets closed for the Labor Day holiday.
Russia's blue-chip MICEX index finished 0.6% lower at 1,392.40,
while the Russian ruble reached a record low against the U.S.
dollar, according to The Wall Street Journal. The greenback
(USDRUB) late Monday bought 37.2702 rubles, compared with 37.1605
rubles on Friday.
France's CAC 40 index fell less than 2 points to 4,379.73, while
the yield on France's 2-year bond turned negative for the first
time.
The U.K.'s FTSE 100 closed up 0.1% at 6,825.31, but Tesco PLC
shares continued to lose ground after Friday's profit warning.
(Read more about Europe's notable stock moves here:
http://www.marketwatch.com/story/novartis-up-iliad-drops-european-movers-2014-09-01.)
Economic data: Germany received downbeat, though expected,
confirmation that its economy shrank in the second quarter. Gross
domestic product contracted 0.2% on adjusted terms after growth of
0.7% in the first quarter, according to figures from government
agency Destatis.
Meanwhile, a report from Markit showed German factories in
August logged their most sluggish month since September 2013. The
figures were part of a headline measure that showed activity in the
euro zone's manufacturing sector fell to 50.7 from 51.8 in July.
The final activity reading was slightly lower than the preliminary
estimate of 50.8.
The euro (EURUSD) was little changed after the euro-zone
economic data, trading around $1.3136. But it was down from
Friday's level of around $1.3170.
Comments: "Russia's escalation of the conflict in Ukraine has
taken a toll on the internationally exposed manufacturing sector,
and that effect could yet worsen further in the coming months,
given recent confidence drops in the more directly exposed core
European economies," said Robert Wood, chief U.K. economist at
Berenberg, in note about a slowdown in the U.K. manufacturing
sector. Data from Markit/CIPS released Monday showed the sector
expanded at the slowest pace in 14 months in August.
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