European stocks dived to nine-month lows today, with banks and automakers bearing the brunt of the selloff, after Russia launched an all-out invasion of Ukraine.
The pan-European STOXX 600 index tumbled 3.3% to its lowest since May 2021, marking a correction, or 10% drop, from its record high in January.
Investors globally rushed to the relative safety of gold and government bonds and dumped equities after Russian forces invaded Ukraine by land, air and sea in the biggest attack by one state against another in Europe since World War Two.
US President Joe Biden and other Western leaders promised tough sanctions in response.
European banks most exposed to Russia, including Austria's Raiffeisen Bank, UniCredit and Societe Generale, slumped between 12.2% and 23%, while the wider banking index fell 8.2%, its worst day since the pandemic-fuelled selloff of March 2020.
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Major regional indexes including France's CAC 40, Germany's DAX and Britain's FTSE 100 each fell close to 4% as investors feared the potential impact of severe Western sanctions on Russia.
"The war, sanctions, and the likelihood of meaningful retaliation by Russia together will likely cause a material global recessionary shock," Eurasia Group analysts said.
"While the direct costs of the war are centred in Ukraine and Russia, sanctions on Russian banks and trade will likely cause meaningful disruptions to global trade and financial relationships with far-reaching effects."
A gauge of volatility in euro zone equities eased at the close of the market, after earlier touching its highest since October 2020.
Europe's oil & gas index slipped 0.3%, falling the least among sectors, as oil prices surged over 6%, pushing Brent crude past $100 a barrel for the first time since 2014. The sector remains Europe's top performer this year with a 7.6% gain.
Meanwhile, renewable energy firms such as Orsted, Vestas Wind Systems and EDP Renovaveis surged over 10%, as the group was seen as benefiting from a shift to renewable energy as gas prices soar.
Defence stocks were also a bright spot, with UK's BAE Systems, Germany's Re-install and France's Thales gaining between 3.4% and 5.2%.
"Whether there will be a full-blown war or not, the simple strategy is to bet on a spike in inflation," said Yuan Yuwei, partner, Water Wisdom Asset Management in Hang.
"That means buying oil and agricultural products, and shorting consumer shares and U.S. growth stocks."
European Central Bank policymakers were gathering on Thursday for an informal get-together likely to now turn into a crisis meeting as the Russian invasion of Ukraine threatens to derail regional economic growth and complicate the ECB's path out of negative interest rates.
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Meanwhile, US stock indexes slid more than 1% today, led by losses in bank stocks, as Russia's all-out invasion of Ukraine sparked a widespread selloff in global markets.
On the benchmark S&P 500, all the 11 major sectors slipped into the red, with financial stocks falling 2.9%, while tech and consumer discretionary stocks lost more than 1% each.
The United States and its allies promised tough sanctions against Moscow after weeks of fruitless diplomatic efforts and an initial wave of modest sanctions.
Most big lenders, including Bank of America Corp, Citigroup Inc, Wells Fargo and Goldman Sachs Group slipped over 4% each.
Tesla dropped 2.5% to lead losses among the mega-cap growth names. Apple and Amazon.com fell over 2% each.
The CBOE Volatility index, also known as Wall Street's fear gauge, was last trading at 36.81, its highest since 24 January.
"Even though the invasion isn't a total surprise, the stock market is still taking a sell first ask questions later approach," said Ryan Detrick, Chief Market Strategist at LPL Financial.
"It is just the uncertainty of how serious things could get. Will Europe get involved? Will United States get more involved? We know more serious sanctions are going to come against Russia, but the fallout from that is just uncertain."
