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European markets down as new Russia sanctions loom

July 21, 2014, 11:28 AM UTC
298 Crew And Passengers Perish On Flight MH17 After Suspected Missile Attack In Ukraine
Brendan Hoffman--Getty Images

European stock markets opened the week firmly in the red as the prospect of a fresh round of E.U. sanctions against Russia in the aftermath of the MH17 disaster loomed into focus.

European leaders at the weekend had warned that they were ready to announce fresh measures at a meeting of foreign ministers scheduled for Tuesday, unless President Vladimir Putin started to pull his weight with pro-Russian separatists in eastern Ukraine who have frustrated the attempts of international observers to investigate the scene of the crash and remove the bodies of the dead.

Dutch Prime Minister Mark Rutte warned Putin Sunday that Russia was facing a “last chance” to behave more cooperatively, a threat that appeared to gain more heft after France and Italy, the two countries which have been most reluctant to impose sanctions in recent months for fear of harming their own fragile economies, signalled a change in their thinking.

“If Russia doesn’t take the necessary measures immediately, consequences will be decided by the E.U…on Tuesday,” French President Francois Hollande’s office said in a statement, after Hollande spoke with both U.K. Prime Minister David Cameron and German Chancellor Angela Merkel at the weekend.

Meanwhile, the Wall Street Journal cited a spokeswoman for the Italian Foreign Ministry as saying that “”If Russia doesn’t cooperate with the investigation” into the circumstances of the plane crash, “we are very much ready to support the sanctions.”

The Euro Stoxx 600 was down 0.3% at 0700 EDT, while the German DAX, a market more exposed than most to trade with Russia, was down 0.7%. However, it was again the Russian market itself which fell most sharply, losing 1.5% to a new two-month low. The ruble, however, was broadly steady against the dollar and the euro and oil prices, too, were steady after a sharp run-up last week.

In Moscow, President Vladimir Putin issued his first official statement since the crash, saying that “no-one has the right to use this tragedy for their own narrow, political goals” and blaming the incident on Ukraine’s decision to resume hostilities after the election of President Petro Poroshenko at the end of June.

Italy’s FTSE MIB index was the worst-performing of the western European markets, losing 1.0%, but that owed more to another set of extremely weak set of industrial orders and sales data. Statistics office Istat said industrial sales fell 1% in June from May and that new orders in May fell 2.1% from the previous month. Export sales fell by 1.9% while domestic sales fell by 0.6%, adding to worries that the euro’s high exchange rate is stifling exporters.