European stocks set for big drop, though still at one-month high

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Oil prices have also fallen, while gold is still set for its biggest quarterly rise since late 2020

London — European stocks were little changed on Thursday, holding near recent one-month highs but set for the biggest quarterly drop since the start of 2020, while oil prices fell and eastern Ukraine braced for fresh attacks.

Oil prices have surged since Russia invaded Ukraine in late February and the US and allies responded with hefty sanctions on Russia, the second-largest exporter of crude. Asian shares fell after Chinese purchasing managers index data showed manufacturing and services activity contracted in March. Peter McCallum, rates strategist at Mizuho, said that investors were still cautious about Ukraine, with central banks facing a “stagflation environment”.

A key part of the yield curve steepened on Wednesday, unwinding recent moves betting that aggressive US Federal Reserve policy tightening could send the world's largest economy into recession as it tries to curb soaring inflation. “With Russia’s invasion having lasted for over five weeks now, we’re increasingly seeing the impact reflected in the official inflation numbers,” Deutsche Bank strategist Jim Reid wrote in a note to clients.

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