European shares plunge as investors assess Ukraine crisis

European shares dropped to a four-month low on Monday, with auto and technology stocks leading the losses after comments from the Kremlin quelled hopes of a resolution to Europe’s biggest military crisis in decades.

The pan-European STOXX 600 slid 1.3% to its lowest level since October over concerning headlines related to the Russia-Ukraine conflict.

The technology sub-index shed 2.6% to its lowest since March last year and marked their fourth straight day of losses. The sector, along with the European benchmark, has spent seven of eight weeks in negative territory so far this year.

The Kremlin on Monday said there were no concrete plans for a summit over Ukraine between Russian President Vladimir Putin and his U.S. counterpart Joe Biden, after the French president said the two leaders had agreed on a meeting in principle.

Putin also said he would decide within hours on a request by two regions of eastern Ukraine held by Russian-backed separatists to be recognized as independent – a move that could give Moscow a reason to openly send troops.

Meanwhile, Paris blue-chips touched their lowest level since early December and German stocks fell to 11 month lows.

“Simmering tensions over Ukraine kept investors on edge at the start of the new trading week even as hopes of a peaceful resolution for the crisis were kept alive by a last-ditch effort by France,” said Raffi Boyadjian, lead investment analyst at brokerage XM.

“The latest developments suggest the markets’ rollercoaster ride is far from being over just yet as the Ukraine crisis has erupted at a time when traders are also grappling with tightening monetary policy around the world amid soaring inflation,” Boyadjian added.

The STOXX 600 has lost around 20.2% so far this year with concerns about Ukraine leading to bearish sentiments and amid risks of aggressive policy tightening from the U.S. Federal Reserve and other central banks to combat inflationary risks.

Meanwhile, the euro zone economic recovery rebounded sharply this month as an easing of coronavirus restrictions gave a boost to the bloc’s dominant service industry, a survey showed, but consumers faced prices rising at a record rate.

Worldline dropped 2.9% after the payments company said it has entered exclusive talks to sell its TSS terminals business to U.S. financial company Apollo Funds in a deal potentially worth around 2.3 billion euros ($2.61 billion).

French vaccine maker Valneva climbed 1.6% after saying its Scottish unit has received a grant of up to 20 million pounds ($27 million) to partly fund the research and development of manufacturing its COVID-19 vaccine VLA2001.

U.S. markets are closed on Monday for the Presidents Day holiday.

($1 = 0.8804 euros)

(Reporting by Anisha Sircar and Shashank Nayar in Bengaluru; Editing by Sherry Jacob-Phillips, Hugh Lawson and Angus MacSwan)