Europe open: Shares slump on Ukraine attacks, UK bond woes

European shares opened sharply lower on Tuesday over fears about Russia’s increased use of missiles to attack Ukraine and another sell-off of UK government bonds in response to Finance Minister Kwasi Kwarteng’s poorly-received mini-budget.

The pan-European Stoxx 600 index was off more than 1% in early deals with all major regional bourses in the red. Weak sessions in the US and Asia also dampened sentiment.

Air raid sirens were sounded again in cities across Ukraine after Monday’s random attacks which had so far killed 19 people. Moscow has increased its use of missiles in retaliation for a bomb attack on a key bridge linking Russia to the annexed territory of Crimea.

In the UK, the Bank of England has been forced to intervene again to shore up the bond market as investors dump government gilts after Kwarteng announced a raft of unfunded tax cuts almost two weeks ago. The Institute for Fiscal Studies think tank said his plan would require a £60bn reduction in public spending.

Citing a "material risk" to financial stability, the BoE said it would buy up to £5bn of index-linked debt per day, starting on Tuesday and expiring on Friday.

Adding pressure to markets was news that the UK unemployment rate edged down to 3.5% in the three months to August from 3.6% in the previous quarter.

Data also showed that after inflation total pay fell by 2.4% and regular pay fell by 2.9%.

In equity news, Swiss fragrance and flavour maker Givaudan fell 6% as the company said it it was on track to implement price increases to offset higher input costs.

Reporting by Frank Prenesti for Sharecast.com