Stocks extend losses as Ukraine war escalates

The STOXX index sank 1.4% to 431 points, hitting a new low for the year and the MSCI All Country stocks index shed 0.6% to 686 points, down about 10% for the year

Stocks extended their losses for the week on Friday as investors piled into government bonds and gold for cover while scrutinising the latest twists in Russia's escalating invasion of Ukraine, which included seizing a huge nuclear plant.

Industrial metals, grains and oil gained while Asian shares mined 16-month lows after news of a fire, later extinguished, near a Ukraine nuclear facility following fighting with Russian forces.

In Europe, the STOXX index of 600 companies sank 1.4% to 431 points, hitting a new low for the year as the benchmark eyed correction territory, meaning down 10% from its highs.

The MSCI All Country stocks index shed 0.6% to 686 points, down about 10% for the year.

With a 25 basis point interest rate increase by the Federal Reserve later this month now all but certain, economic data like U.S. non-farm payrolls on Friday before the opening bell on Wall Street were taking a back seat, said Michael Hewson, chief markets analyst at CMC Markets.

The market is driven so much by news headlines risk that the fundamentals barely matter at the moment, Hewson said.

Even though U.S. rates were set to rise, investors were still piling into government bonds for safety, he said.

You have escalating inflation risk, you have huge uncertainty about what's going to happen next on the headline front, and a Russian president who wouldn't rule out nuclear weapons - that is a pretty toxic backdrop, Hewson said.

Crude oil rebounded, and aluminium touched a record high of $3,850 a tonne in London as the intensifying conflict in Ukraine stocked fears of a supply squeeze in the metal from Russia, a major producer.

Nickel touched an 11-year high for similar reasons.

People came into this situation thinking commodities had had enough of a run already but the war has added a new lease of life, said Mike Kelly, head of global multi-asset at PineBridge Investments.

Skyrocketing inflation is what people fear and the best hedge for that is energy and industrial metals, said Kelly.

In currency markets, the euro lost further ground and was set for its worst week versus the dollar in nearly two years as the prospect of sustained high commodity prices continued to drag on expectations of European economic growth.