By Sara Sjolin and Carla Mozee, MarketWatch
LONDON (MarketWatch) -- Continuing concerns about the fallout
from the Ukraine-Russia standoff added pressure on European stocks
on Friday, with German equities bearing the brunt of tension.
The Stoxx Europe 600 index fell 0.8% to close at 333.50,
trimming its weekly advance to 0.3%. U.S. stocks were also lower.
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The losses came as U.S. President Barack Obama consulted with
key European leaders on the Ukraine crisis, warning Russia that
they are prepared to proceed with more significant sanctions
against the country.
The consultation came after U.S. Secretary of State John Kerry
late Thursday accused Russia of violating its commitment to ease
tensions in eastern Ukraine.
"If Russia continues in this direction, it will not just be a
grave mistake, it will be an expensive one," Kerry said, citing
growing outflow of capital from Russia in recent months. "It's a
preview of how the free world will respond."
In response to the crisis-fueled volatility on financial
markets, Standard & Poor's Ratings Services on Friday cut
Russia's credit rating to one notch above junk.
S&P further put Russia in line for another rating downgrade,
a move "that will heighten concerns about the financial impact of
the conflict in eastern Ukraine," Richard Perry, market analyst at
Hantec Markets, said in a note.
Russian rate hike
Meanwhile, Russia's central bank on Friday bumped up its key
interest rate by a half-percentage point to 7.5%. The risk that
inflation will exceed its 5% target at the end of this year has
"increased substantially" because of exchange-rate dynamics and
"unfavorable conditions" in trade markets, the Central Bank of the
Russian Federation said in a statement on its website.
Russia's blue-chip MICEX index fell 1.6% to 1,280.12, and the
RTS index pulled back 2.3% to 1,119.37.
Among other European benchmarks, Germany's DAX 30 was hit hard,
down 1.5% to 9,401.55, as the country has a deep goods-trading
relationship with Russia. For the week, the German benchmark lost
0.1%.
The U.K.'s FTSE 100 gave up 0.3% to 6,685.69, but closed out the
week 0.9% higher.
France's CAC 40 lost 0.8% to 4,443.63, reducing its weekly
advance to 0.3%.
Cyprus's CSE General Index rose 0.1% to 118.19, as S&P
lifted the long-term credit rating on the Mediterranean country to
"B" from "B-," based on a better-than-expected economic and
budgetary performance.
Goldman upgrade
But even with the Ukraine uncertainty sending most shares lower
on Friday, Goldman Sachs remained broadly upbeat on European
equities and upgraded its long-term targets for the Stoxx 600. The
new forecasts for the pan-European benchmark are 410 and 450 for
the end of 2015 and 2016 respectively, compared with 380 and 400
previously.
"The main driver of this is a larger expected decline in the
equity risk premium, resulting in a higher P/E multiple," the
Goldman Sachs analysts said.
Movers
Among movers on Friday, shares of Tullow Oil PLC fell 2.5%,
after the company said it would abandon an exploration well in
Mauritania because of a lack of discovery of hydrocarbons.
French auto maker Peugeot SA said its quarterly sales rose, but
its shares fell by 3.6%.
Also in France, shares of Alstom SA were halted, fulfilling a
request from the country's market authority AMF, according to
exchange operator Euronext Paris. Alstom shares on Thursday rallied
10.9%, following a report by The Wall Street Journal that General
Electric Co. (GE) is in talks to buy Alstom's energy business. On
Friday, The Wall Street Journal reported the French government is
working on alternatives to that sale.
Neste Oil Oyj slid 5.1% after the Finnish oil-refining company
lowered its full-year guidance for operating profit.
Deutsche Bank AG (DB) gave up 2% after German newspaper
Handelsblatt reported that the bank is considering a capital
increase of up to 5 billion euros ($6.92 billion). A representative
from Deutsche Bank declined to comment on the report.
Bucking the negative trend, Electrolux AB jumped 11%.
First-quarter earnings for the Swedish household-appliance maker
outstripped expectations. The company said a pickup in demand in
Europe offset a temporary decline in the U.S., which grappled with
unusually cold weather this winter.
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