By Josie Cox
The Russian ruble hit a fresh record low against the U.S. dollar
on Monday, burned by continuing fighting in Ukraine over the
weekend and European Commission President José Manuel Barroso
warning that the situation was approaching "a point of no
return."
The dollar rose by 0.7% to 37.33 against the ruble in early
trade, surpassing the previous record set Friday. Moscow's Micex
equity index clung to a slim gain of 0.2%, while the dollar-traded
RTS index lost 0.5%. Since last Monday, the former is down just
over 3.5%, while the latter has declined by around 6.6%.
On Sunday, Ukrainian government forces lost more ground to
Russian-backed separatists in heavy fighting in the east of the
country. While on Saturday, European leaders threatened to impose
more sanctions on Moscow if it doesn't end its support for the
rebels.
Economists at Barclays PLC said that they expected a new set of
sanctions in the coming week, but warned that this "could trigger
more retaliation measures by Russia."
After suffering a sell off late last week, which strategists
attributed to geopolitical tensions, European stock markets were
steady, with investors hesitant to take major positions before key
macroeconomic data.
The Stoxx Europe 600 was up nearly 0.2%, with major indexes in
the U.K, Germany and France all moderately lower.
Earlier in the session, Swedish PMI came in at 51.0 for August,
compared with a July reading of 55.2, sending the krona to a
three-week low against the euro and a 14-month low against the
Norwegian krone.
The euro continued its slow slide against the greenback,
touching a near-year low of $1.3119 before rate announcements from
both the European Central Bank and the Bank of England later in the
week.
Several banks, including BNP Paribas, RBC and Nomura, expect the
ECB to trim interest rates in a further bid to fuel the sluggish
recovery.
Last month, ECB President Mario Draghi hinted that the central
bank could be preparing further stimulus, even raising the prospect
of quantitative easing. Some economists have said, however, that
the central bank is likely to want to gauge the impact of its June
measures and assess the take up of the targeted longer-term
refinancing operation before taking further action.
Back in equity markets Swiss drug maker Novartis AG led the
pan-European index, adding almost 3% after a positive testing of
its LCZ696 heart drug. Fabian Wenner, an analyst at
KeplerCheuvreux, raised his target price to 87 Swiss francs from 81
francs.
France's Iliad SA, which is trying to buy U.S. operator
T-Mobile, was the biggest loser on the index after the telecom
operator reported a fall in first-half net profit on Friday.
In commodities markets Brent crude oil lost 0.3% to trade at
$102.89 a barrel, while gold added 0.1% to $1,289.20.
Write to Josie Cox at josie.cox@wsj.com