World stocks drop as Ukraine fighting rages on

The MSCI world equity index was down 0.05%, the pan-regional STOXX 600 benchmark was up 0.1% and the S&P 500 and Nasdaq futures were down 0.1% and 0.3% respectively

Stock markets around the world slipped on Monday as fighting in Ukraine raged on with no sign of a ceasefire even as diplomatic efforts continued, while Brent crude prices climbed above $110 a barrel as supplies remained tight.

Turkey's foreign minister said on Sunday that Russia and Ukraine were nearing agreement on ‘critical’ issues and he was hopeful for a ceasefire if the two sides did not backtrack from progress achieved so far.

Most share markets rallied last week in anticipation of an eventual peace deal on Ukraine, but it could take actual progress to justify further gains.

U.S. President Joe Biden will meet NATO allies on Thursday and visit Poland on Friday.

The coming days will be a litmus test on whether last week's risk-on rally was overdone. Hopes related to a peaceful resolution in Ukraine have relied on headlines more than evidence, said ING's Francesco Pesole and Chris Turner.

Should a ceasefire not be agreed in the coming days, markets may struggle to hold on to their sanguine approach to the conflict, they added.

The MSCI world equity index was down 0.05% by 0834 GMT. European shares were choppy with the pan-regional STOXX 600 benchmark last up 0.1%. The S&P 500 and Nasdaq futures were down 0.1% and 0.3% respectively.

In Asia, where Japanese markets were shut for a public holiday, the MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.7% with investors awaiting further details of possible stimulus from Beijing.

BofA's global fund manager survey last week had a bearish bias with cash levels the highest since April 2020 and global growth expectations the lowest since the financial crisis of 2008. Long oil and commodities were the most crowded trade, and vulnerable to a pullback.

The war in Ukraine, surging commodity prices, supply chain issues and policy tightening have all made investors less upbeat about the prospects for global earnings growth.

The range of outcomes is now unusually wide so at the margin you should rein in the amount of risk you take, said Truist Co-Chief Investment Officer Keith Lerner.

In the last few years we have had huge upward revisions (on earnings) but this year there is less room for upward earnings surprises. We still think companies will beat estimates but to a lesser degree, he added.

Investors were also waiting to see if Russia would meet more interest repayments this week. It must pay $615 million in coupons this month while on April 4 a $2 billion bond comes due.

Russia will also allow OFZ bond trading on the Moscow Exchange to resume on Monday but equity trading, suspended since Western sanctions threw markets into turmoil late last month, will remain shut.