European stocks skid on tightening Russian sanctions, while defense companies rally

The German DAX
DAX,
-2.31%
dropped 2.5%, the French CAC 40
PX1,
-2.82%
lost 3% while the U.K. FTSE 100
UKX,
-1.39%
lost 1.6%.

Futures on the Dow Jones Industrial Average
YM00,
-1.34%
fell 510 points.

“The free world is uniting against Putin‘s war – and seems ready to pay a price for its resolve. The exclusion of major Russian banks accounting for 70% of the Russian banking market from the SWIFT system to make payments and the possibly even more far-reaching attempt to limit the use of Russia’s foreign exchange reserves of some $630bn can cause problems for financial and non-financial companies outside Russia,” said Holger Schmieding, chief economist at Berenberg Bank in London.

Financials were hammered. ING
INGA,
-10.77%,
Unicredit
UCG,
-9.87%
and Societe Generale
GLE,
-11.07%
each dropped 11%.

Austria’s Raiffeisen Bank International
RBI,
-13.72%,
which earned about a third of its profits from Russia last year, skidded 15%.

BP
BP,
-7.07%
shares fell 7% as the oil giant said it’s taking a $25 billion charge to exit its 19.75% stake in Rosneft. Renault
RNO,
-8.66%,
the owner of Russian carmaker Avtovaz, dropped 8%.

Anglo-Russian gold miner Polymetal International
POLY,
-53.97%
dropped 52%. Nokian
TYRES,
-21.81%,
which makes most of its tires in Russia, dropped 21%.

Defense stocks soared as Germany said it will set up a special €100 billion fund to upgrade its armed forces. Rheinmetall
RHM,
+28.44%
shares jumped 32%, BAE Systems
BA,
+13.75%
rose 14% and Leonardo
LDO,
+15.14%
rose 13%.

The yield on the 10-year German bund
TMBMKDE-10Y,
0.188%
fell 6 basis points to 0.17%.

While the Russian stock market had not opened, U.K.-listed shares of companies including Sberbank
SBER,
-62.06%
and Lukoil
LKOD,
-53.26%
plunged. Russia’s central bank jacked up its key interest rate to 20% from 9.5%.