By Sara Sjolin, MarketWatch
LONDON (MarketWatch) -- Major red flags of the possible fallout
from tougher sanctions on Russia came on Tuesday, when U.K. oil
producer BP PLC warned that further economic restrictions would
hurt its business. European stock markets, however, advanced
against a background of solid earnings reports.
Sanction details: The U.S. and Europe already agreed on Monday
to adopt what would be the toughest restrictions on the Kremlin so
far in an effort to force Moscow to cut support for the pro-Russia
separatists in eastern Ukraine. European Union ambassadors from the
28 members finalized the details on Tuesday.
After more than seven hours of deliberations Tuesday, the EU --
Russia's largest trading partner -- agreed on a deal to impose
wide-ranging restrictions against Russia, including limiting
financial transactions with Russia's state banks, according to the
Financial Times. The new sanctions also target the Russian oil
industry, defense sector, and sensitive technologies.
Market reactions: Shares of BP (BP) dropped 2.5% after the U.K.
oil major warned that additional measures imposed on Russia and
Rosneft would have a material impact on its business. Read: BP
among losers in Europe on Russia sanctions woes
Most other European stocks, however, were rising with some solid
earnings reports overshadowing the sanction fears. The Stoxx Europe
600 index added 0.3% to close at 342.27, its first close in
positive territory in three days. The benchmark pared gains a bit
after the news about the fresh EU sanctions on Russia.
Germany's DAX 30 index climbed 0.6% to 9,653.63, while France's
CAC 40 index gained 0.5% to 4,365.58. The U.K.'s FTSE 100 index
rose 0.3% to 6,807.75.
Comments: Analysts appeared to be concerned with three things on
Tuesday: Russian sanctions, earnings reports and the upcoming
deluge of U.S. events and data.
In relation to Russia, Naeem Aslam, chief market analyst at
AvaTrade, said the question really is "how far we are willing to
stand the pain which will emerge due to these sanctions."
"Similarly, if Russia is going to pay any attention to these
sanctions and acknowledge that enough is enough and they are
throwing the towel," he said in a note.
The U.S. Federal Open Market Committee began its two-day policy
setting meeting today, with the decision due Wednesday at 2 p.m.
Eastern Time. Economists at Deutsche Bank said in a note that the
Fed is unlikely to say anything it thinks will move the markets
this week.
"Neither the overall economic activity picture nor the inflation
data have been firm enough recently to move the Committee to signal
that they are moving closer to lift-off," they said.
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