San Francisco Frontiers - EU stocks sag on prospect of more Russia sanctions

Wall Street also ended lower after a top Federal Reserve official said the central bank could act more aggressively against inflation, while Asian equity markets rose. The dollar was mixed against major rivals.

Frankfurt stocks shed 0.7 percent while Paris slumped 1.3 percent after the European Union signaled it wants to impose sanctions on Russian coal and shipping.

"Tensions between Moscow and the West have ticked up, and that has prompted a decline in equities," said market analyst David Madden at Equiti Capital, pointing to a thinly veiled threat by Russian President Vladimir Putin to withhold food exports to "hostile" nations.

Russia is a major exporter of wheat, as is Ukraine, where production is likely to be severely disrupted due to the invasion.

The EU however did not announce measures targeting Moscow's oil exports.

- 'Pressure is growing' -

Both Brent North Sea and WTI oil contracts dipped on Tuesday, after the prospects of sanctions on Russia crude had sent oil prices sharply higher Monday.

While coal sanctions are likely to have a limited impact, "the pressure is growing for this commitment to be extended to oil and gas supplies," said market analyst Michael Hewson at CMC Markets UK.

"It is becoming ever clearer that Russia is likely to become increasingly more isolated as sanctions get tightened and widened further, with the prospect that inflationary pressure in the global economy will remain more persistent in the coming months," he added.

The additional EU sanctions came days after dozens of bodies were found on the streets in Bucha, northwest of Kyiv, though some countries remain worried of the potential fallout from targeting Russia's economy.

Ukrainian President Volodymyr Zelensky blames Russian troops for the killings, but the Kremlin has denied responsibility.

Meanwhile a source told AFP that the United States, in coordination with the G7 and European Union, plans to ban "all" new investments in Russia on Wednesday, while the US Treasury said Washington has barred Russia from making debt payments using funds held at American banks.

In New York, major stock indices retreated after Fed Governor Lael Brainard said the US central bank was "prepared to take stronger action" to reduce inflation that has hit levels not seen since the 1980s.

The remarks helped lift the yield on the 10-year US Treasury note above 2.5 percent, well above where it was throughout the Covid-19 pandemic.

"We already had the yields moving higher but after Lael Brainard's comments, it just poured some fuel on the fire," said Brad Bechtel, managing director at FX Jefferies.

US traders on Wednesday will be keeping a close eye on the minutes from the Fed's most recent policy meeting, hoping for an insight into officials' thinking over future monetary policy.

After the Fed's expected quarter-point interest rate hike last month, central bankers have signaled a half-point increase is possible in May in light of soaring inflation, as strong jobs growth and other data suggest the US economy remains robust enough to absorb higher borrowing costs.

- Key figures around 2145 GMT -

New York - Dow: DOWN 0.8 percent at 34,641.18 (close)

New York - S&P 500: DOWN 1.3 percent at 4,525.12 (close)

New York - Nasdaq: DOWN 0.8 percent at 14,204.17 (close)

EURO STOXX 50: DOWN 0.8 percent at 3,917.85 (close)

London - FTSE 100: UP 0.7 percent at 7,613.72 (close)

Frankfurt - DAX: DOWN 0.7 percent at 14,424.36 (close)

Paris - CAC 40: DOWN 1.3 percent at 6,645.51 (close)

Tokyo - Nikkei 225: UP 0.2 percent at 27,787.98 (close)

Hong Kong - Hang Seng Index: Closed for a holiday

Shanghai - Composite: Closed for a holiday

Brent North Sea crude: DOWN 0.8 percent at $106.64 per barrel

West Texas Intermediate: DOWN 1.3 percent at $101.96 per barrel

Euro/dollar: DOWN at $1.0903 from $1.0978 late Monday

Pound/dollar: UP at $1.3071 from $1.3114

Euro/pound: DOWN at 83.38 pence from 83.65 pence

Dollar/yen: UP at 123.60 yen from 122.78 yen

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C.Diaz--SFF