By Geoffrey Smith
Investing.com -- European stock markets opened lower on Tuesday for a fifth straight session after the Bank of England warned of a "material risk to U.K. financial stability" from the unfolding crisis in the country's pension fund sector.
The grim mood was also reinforced by reports of fresh air raid warnings in Ukraine, after the indiscriminate wave of Russian missile strikes on Monday appeared to point to another escalation of Russia's war.
By 03:45 ET (07:45 GMT), the benchmark Stoxx 600 was down 2 points or 0.5% at 388.14, while the narrower Eurozone Stoxx 50 was down 0.4%. Among national markets, the biggest loser was Russia's RTS , which fell another 1.5% after slumping 12% already over the last week. In western Europe, the FTSE 100 was down 0.7%, while the U.K.-focused FTSE 250 midcap index was down 0.6%. Germany's DAX fell 0.6%, while the FTSE MIB 40 fell 1.4%.
European markets drew little support from reports that the German government had shifted its position to support the issuance of EU debt to help fund the bloc's response to the natural gas crisis this winter. That news did, however, support gas prices themselves, with the benchmark front-month Dutch TTF contract rising nearly 5% to 168.14 euros a megawatt hour.
Banks underperformed across the continent after the Bank of England's warning about the bond market and the problems of pension funds that engage in 'liability-driven investing', a strategy that has forced them to liquidate holdings of safe assets in order to provide more margin on long-dated interest rate derivatives.
Italian banks - always sensitive to sharp rises in market interest rates - fared the worst, with Banco Bpm SpA (BIT: BAMI ) down 4.9% and Unicredit (BIT: CRDI ) down 2.9%. Deutsche Bank (ETR: DBKGn ) and Commerzbank (ETR: CBKG ) also both fell 3.0%.
Defensive-themed industries fared slightly better, with brewing giants Carlsberg (CSE: CARLb ) and Heineken (AS: HEIN ) rising 1.0% and 0.5%, respectively, while Unilever (LON: ULVR ) stock rose 0.5% and Imperial Brands (LON: IMB ) - supported by last week's buyback announcement - rose 0.4%.
The market is now bracing for the third-quarter earnings season, which begins for Europe with the release of LVMH (EPA: LVMH ) and Givaudan (SIX: GIVN ) results after the close. The U.S. earnings season begins in earnest on Friday.
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