European stocks are an inch higher as traders are likely to face more sanctions

European stocks rose higher on Tuesday, boosted by utility and energy companies, as investors weighed on the possibility of increasing sanctions on Russia, including possible sanctions on Russia’s coal and oil imports.

Europe’s Stoxx 600 index rose 0.3 percent. The regional gauge oil and gas sub-index added 1 percent, while Brent crude, the international benchmark, added 0.9 percent.

London’s FTSE 100 and Germany’s Dax both lost 0.2 percent. Wall Street benchmark S&P 500 and tech-heavy Nasdaq 100 index tracking futures contracts were flat in early European trade.

The move comes after the United States and France called for a significant increase in sanctions against Russia following reports of atrocities by its forces in Ukraine.

French President Emmanuel Macron has called for a ban on oil and coal imports from Russia, although he has not called for a ban on Russian natural gas imports – a vital source of energy for Germany, Italy and some Eastern European countries. U.S. President Joe Biden has said he will continue to “add more sanctions” on Russia and has called for a trial in Ukraine to assess possible war crimes committed by President Vladimir Putin’s forces.

Tancredi Cordero, founder of Kuros Associates, said the German economy would “see its average input costs, especially in terms of energy and products, increase significantly, which would reduce the operating margins of most domestic companies.”

“I do not think there will be a recession [in Germany]”It’s a very strong economy,” he said. “But in the short term, Germany will suffer in terms of exposure by institutional investors.”

If not a full-blown recession, Europe could be set for a protracted battle of stagflation, said Florian Yelpo, multi-asset portfolio manager at Lombard Odyssey Investment Manager, citing simultaneous high inflation and a period of muted economic growth.

“It’s not necessarily bad for equities,” he said. “If you are a company in your market that is able to push consumers upwards in cost, you are not likely to be hurt at the beginning of inflation and we are still at the beginning.”

In the public debt market, the yield on the 10-year U.S. Treasury note – which goes against its value and a benchmark for global borrowing costs – added 0.04 percentage points to 2.45 percent.

Germany’s sovereign bonds also came under pressure, with the 10-year bond yield adding 0.04 percentage points to 0.56 percent. The UK’s equivalent gilt yield added 0.06 percentage points to 1.61 percent.

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