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 agreed on Monday to adopt
what would yet be the toughest restrictions on Kremlin to force
Moscow to cut support for the pro-Russia separatists and European
Union ambassadors from the 28 member states are meeting on Tuesday
to finalize the details.
The EU -- Russia's largest trading partner -- is expected to
agree on "phase three" sanctions for the first time, which could
include limiting financial transactions with Russia's state banks
as well as targeting entire sectors rather than individuals. The
U.S. is likely to follow suit and announce similar sanctions.
Market reactions: Shares of BP (BP) dropped 1.4% 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 0.4% to 342.64, on track for the first close in
positive territory in three days.
Germany's DAX 30 index climbed 0.5% to 9,648.13, while France's
CAC 40 index gained 0.6% to 4,370.64. The U.K.'s FTSE 100 index
rose 0.5% to 6,820.31.
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 begins 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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