European shares plunge as investors assess Ukraine crisis

© Reuters. FILE PHOTO: The German share price index DAX graph is pictured at the stock exchange in Frankfurt, Germany, February 17, 2022. REUTERS/Staff

By Anisha Sircar

(Reuters) -European shares pared early gains to trade flat on Monday, with technology stocks leading the losses, after comments from the Kremlin partially dimmed hopes of a resolution to the Russia-Ukraine standoff.

The pan-European STOXX 600 was at 460.92 points, as of 0930 GMT, after rising up to 463.62 in early trade.

After U.S. President Joe Biden and Russia’s Vladimir Putin reportedly agreed in principle to a summit over Ukraine offering a possible path out of one the most dangerous European crises in decades, the Kremlin said there were no concrete plans yet for a summit.

“Europe would be particularly affected by an interruption in trade relations with Russia,” said Ulrich Leuchtmann, head of FX and commodity research at Commerzbank (DE:CBKG).

The United States and Britain have repeatedly cautioned that Russia is about to invade Ukraine, a step Washington and London say would trigger the biggest conflict since the end of World War Two.

“The proposed summit could improve sentiment today, but a lot of things are bubbling under the surface,” said Deutsche Bank (DE:DBKGn)’s Jim Reid, Henry Allen and Tim Wessel in a research note.

The STOXX 600 started the week on a glum note, extending losses from the previous week amid rising geopolitical worries and fears over aggressive policy tightening from the U.S. Federal Reserve and other central banks to combat inflationary risks.

Caught out by ECB President Christine Lagarde’s hawkish tone after the bank’s February meeting – which opened the door to rate hikes this year – bonds from investment-grade European firms have seen yields surge 60 basis points.

Technology stocks shed 1% to mark their fourth straight day of losses. The sector, along with the European benchmark, has spent seven of eight weeks in negative territory so far this year.

Meanwhile, the euro zone economic recovery rebounded sharply this month as an easing of coronavirus restrictions gave a boost to the bloc’s dominant service industry, a survey showed, but consumers faced prices rising at a record rate.

Worldline slipped 0.2% after the payments company said it has entered exclusive talks to sell its TSS terminals business to U.S. financial company Apollo Funds in a deal potentially worth around 2.3 billion euros ($2.61 billion).

French vaccine maker Valneva climbed 1.6% after saying its Scottish unit has received a grant of up to 20 million pounds ($27 million) to partly fund the research and development of manufacturing its COVID-19 vaccine VLA2001.

U.S. markets are closed on Monday for the Presidents Day holiday.

($1 = 0.8804 euros)