European shares fall in week under weight of geopolitical tension

European stocks closed lower on Friday and fell nearly 2% this week, with banking and travel stocks leading the way, on caution around escalating tensions between Russia and Ukraine ahead of the weekend.

Caution took hold in markets around the world as Russian-backed separatists in eastern Ukraine said they planned to evacuate residents from their region and move them to Russia, a shocking twist in a conflict the West believes Moscow plans to use to justify a total invasion of Ukraine.

The pan-European STOXX 600 index closed down 0.81% at 460.81 points and was down 1.9% for the week, with banking and travel stocks the main weekly losers.

However, news that the US secretary of state has agreed to meet with Russia’s foreign minister next week has raised hopes for a diplomatic solution and helped to somewhat limit losses.

“There’s a greater likelihood of a diplomatic solution or some sort of incursion, but very contained,” said Hani Redha, multi-asset manager at PineBridge Investments.

Bank stocks have come under pressure this week after intensifying fears over a potential conflict pushed investors into safer assets, slashing European short-term yields, which tumbled 12 basis points this week.

• In London, the Financial Times index dropped 0.32%, to 7,513.62 points;
• In Frankfurt, the DAX index fell 1.47% to 15,042.51 points;
• In Paris, the CAC-40 index lost 0.25% to 6,929.63 points;
• In Milan, the Ftse/Mib index had a devaluation of 0.61%, to 26,506.79 points;
• In Madrid, the Ibex-35 index registered a drop of 0.94%, at 8,590.00 points;
• In Lisbon, the PSI20 index depreciated by 0.47%, to 5,632.20 points.