Stocks slide, oil rises due to increasing uncertainty

LONDON — World stock markets lost ground on Wednesday after strong gains the previous session, as Russia downplayed hopes of a breakthrough in peace talks with Ukraine and Germany's growth outlook darkened.

Germany was the main eurozone laggard, the DAX index sliding 1.6 per cent two hours from the close after Berlin slashed its economic growth forecast for 2022, warning the war in Ukraine and soaring energy prices would take a toll on Europe's biggest economy.

The war in Ukraine has seen oil soar anew and Brent North Sea crude and West Texas Intermediate both added some 3 per cent on persistent supply worries linked to Ukraine.

Analysts said there was an expectation that OPEC and other major producers including Russia would decide against lifting oil output at their monthly meeting on Thursday.

Ukraine "scepticism" 

"Hopes of a speedy resolution to the Russia-Ukraine conflict have been dashed again, with scepticism surrounding the latest reports of a slowdown of the Russian aggression," noted Richard Hunter, head of markets at Interactive Investor.

"Russia's war of aggression against Ukraine and energy prices are drastically worsening the economic outlook," said the German Council of Economic Experts.

Outside the eurozone, London's main stocks index was just in the green on the heels of a mixed showing in Asia while on Wall Street the Dow Jones index was flat shortly after the opening while the tech-heavy Nasdaq was off 0.4 per cent ahead of Friday's release of US jobs data for a fresh snapshot of the world's top economy.

A strong reading could spur the Federal Reserve to act more aggressively to fight inflation, with some commentators predicting several half-point US interest rate hikes this year.

Russia's pledge to "radically" wind down military activity around two Ukrainian cities including the capital Kyiv, had sparked a Tuesday rally on US and European markets while briefly sending oil prices tumbling.

But world leaders greeted the news with scepticism, with US President Joe Biden saying he wanted to see if Moscow would "follow through" on a promise to de-escalate.

Moscow then Wednesday played down hopes of a breakthrough following talks in Istanbul.

"We cannot state that there was anything too promising or any breakthroughs," Kremlin spokesman Dmitry Peskov told reporters. "There is a lot of work to be done."