- FTSE 100 closes 1% higher
- Russia withdraws some troops from border with Ukraine
- Resource stocks fail to join the party
Stocks in the UK closed higher as the FTSE 100 Index got a boost from big gainer AstraZeneca and read positively into some troops in Russia's military districts adjacent to Ukraine returning to their bases.
The blue-chip FTSE 100 made up of the largest companies listed on the London Stock Exchange, rose 77.33 points, or just over 1%, to close at 7,608.92.
Profit-taking with oil was inevitable after Russia’s Defense Ministry stated that some troops are starting to return to their regular bases after completing drills.
Still, the oil market remains very tight and regardless of the Ukraine situation, crude prices are still on course for a move towards $100 a barrel, according to Edward Moya from online brokerage OANDA.
“Tentative signs of de-escalation in eastern Europe provided risk assets with the space to rally today. Traders hit the buy button with a vengeance this afternoon on hopes that the situation in Ukraine appears to be calming down,” said Chris Beauchamp, chief market analyst at online trading platform IG.
Meanwhile, AstraZeneca PLC (LSE:AZN) gained more than 5% after positive results from drug Lynparza in the treatment of prostate cancer.
3.50pm: FTSE 100 in buoyant mood
Despite resource stocks acting like a millstone around its neck, the FTSE 100 index is well in profit today.
London’s index of heavyweight shares is 57 points (0.8%) to the good at 7,588, despite Fresnillo PLC (LSE:FRES), Anglo American and Rio Tinto PLC (LSE:RIO) from the mining sector sporting losses of 1.7% or more while in the oil sector, Shell PLC (LSE:SHEL, NYSE:SHEL, EURONEXT:SHELL) and BP PLC (LSE:BP.) are both down by around 2%.
“Oil prices have slipped from fresh highs on reports that some troops in Russia's military districts adjacent to Ukraine are returning to bases, a move that could de-escalate tension between the two countries,” said oil & gas-focused broker, SP Angel.
“Russia's defence ministry has confirmed that while large-scale drills across the country continued, some units of the Southern and Western military districts have completed their exercises and started returning to base,” SP Angel added.
One oil stock that is defying the trend is Pantheon Resources PLC (AIM:PANR, OTC:PTHRF), which is 4.5% higher after an operational update from the Theta West field in Alaska.
SP Angel said it was, “An encouraging initial update from Pantheon, suggesting that the reservoir quality at the Theta West #1 location is superior to Talitha #A, with high quality light oil encountered across the entire section. Following these wells, the PANR intends to drill the Alkaid 2 well in Spring/Summer 2022 which, if successful, can commence production soon thereafter.”
2.40pm: US markets open higher
As expected, US stocks opened higher with the tech=heavy Nasdaq Composite leading the way.
The Nasdaq was up 207 points (1.5%) at 13,998. The Dow Jones jumped 352 points (1.0%) to 34,918 and the broader-based S&P 500 advanced 50 points (1.1%) to 4,451.
“Risk appetite is much improved on Tuesday following reports that Russia is pulling back some troops, a significant de-escalation that makes the prospect of an invasion this week much less likely,” said OANDA’s Craig Erlam.
“The Kremlin maintains that it never intended to invade Ukraine and the return of some troops to their regular bases following military exercises is proceeding as was always planned. While risks remain elevated, this looks like a big step in the right direction, and investors, like everyone else, are breathing a huge sigh of relief,” he added.
On this side of the pond, the FTSE 100 is up 51 points (0.7%) at 7,583.
1.15pm: So far, so good
It’s a case of so far, so good, for the Footsie, which has been clawing back a chunk of yesterday’s heavy losses.
The FTSE 100 index was up 47 points (0.6%) at 7,579, with Melrose Industries PLC (LSE:MRO, OTC:MLSPF), the owner of aerospace and automotive engineer GKN (LSE:GKN), leading the way with a 5.0% rise.
Another aerospace-related stock British Airways owner International Consolidated Airlines Group (LSE:IAG) SA is also wanted – up 3.1% at 169.98p.
“Markets are reacting positively to this morning’s news that some Russian troops will return to their regular bases once completing drills. We’re seeing many of the commodity prices which are sensitive to Russian supply falling and some of the ‘Risk off’ moves caused by Friday’s headlines now reversing. Brent Crude and European gas falling 2.5% and 5.5% respectively. Palladium, where Russia’s exports are responsible for 45% of global production, falling by 3.5% and wheat by 2%. It should be noted that prices remain at elevated levels, and most are still higher than where they were last week,” said Mike Owens at Saxo Markets.
“Stocks are in the green as they try and build back from yesterday’s losses. The euro and ruble currencies both gain as tensions ease with the euro 0.2% higher vs US dollar, while RUBUSD is +1.4%. Bond yields are higher swiftly reversing the losses of the past two sessions. US 10-yr back above 2% at 2.029% and the 30-year yield gained 2 basis points. Focus for fixed income swinging back to inflation pressures and the moves central banks will potentially take to tackle it. Gold had spiked 1.3% this morning but has given back that move following the Ukraine developments,” he added.
Unilever PLC (LSE:ULVR) nudged 0.3% higher to 3,823p after RBC Capital Markets switched its rating to “sector perform” from “underperform”, with a price target of 3,600p.
Noon: US stocks to open higher
US stocks are expected to rally at the open following reports that some Russian troops positioned on the border with Ukraine are returning to their bases after completing drills, providing investors with some relief after days of increasing tensions.
Futures for the Dow Jones Industrial Average rose 1.13% in Tuesday pre-market trading, while those for the broader S&P 500 index gained 1.46% and the tech-heavy Nasdaq added 1.97%.
Brent Crude Oil (LSE:BRENT) dipped back to $94 after rising to above $96 earlier.
Markets closed lower on Monday as investors weighed the Federal Reserve’s next move to raise interest rates and Russia’s threat to invade Ukraine.
St. Louis Federal Reserve President James Bullard said the central bank needs to react to accelerating inflation as its credibility is on the line. This may require it to front-load more of its planned removal of accommodation than it would have previously, he said in an interview on CNBC.
The Dow declined 0.49% to 34,566 and the S&P 500 dropped 0.38% to 4,402. The Nasdaq fell 0.23% to 13,791.
In London, the FTSE 100 has perked up again and is up 52 points (0.7%) at 7,583.
“First signs that Russia may be pulling back from the brink of war is being greeted with a tentative sigh of relief by investors, with some sectors making small strides of recovery. As some Russian troops are reported to have begun retreating back to base from a number of key forward positions, the DAX in Frankfurt and the CAC 40 in Paris have climbed back strongly and the FTSE 100 also gained back some ground after Monday’s losses but intense cautiousness remains about Moscow’s agenda and investors remain highly sensitive to the geopolitical situation," said Susannah Streeter at Hargreaves Lansdown.
"Shares in Evraz, the Russia focused miner and steel maker lifted 4% in early trading on the slightly more optimistic outlook, but there’s a long way to go given that shares plummeted 30% on Monday. Oil has slipped back, with Brent crude hovering around $94 a barrel as worries fade a little about supply disruption," she added.
BP PLC (LSE:BP.) is modestly higher despite Brent's dip but Shell PLC (LSE:SHEL, NYSE:SHEL, EURONEXT:SHELL) is 0.5% lower.
10.50am: Hospitality sector revives in January (except in London)
With Russia announcing it is pulling back some military forces that were performing drills, the market is in a happier frame of mind today.
The FTSE 100 has, however, seen early gains shaved. It is now up 38 points (0.5%) at 7,569.
RUSSIA RETURNING SOME TROOPS TO BASES AFTER DRILLS: INTERFAX (FROM BBG)
— Zonebourse (@Zonebourse) February 15, 2022
“The big news this morning came from Russia, which sent stocks and US futures sharply higher, while Brent Crude Oil (LSE:BRENT) dipped back to US$94 after rising to above US$96 earlier. The turnaround was triggered by news some Russian troops positioned on the border with Ukraine were returning to their bases after completing drills,” reported Fawad Razaqzada at ThinkMarkets.
“While this will certainly help reduce tensions in the region, it doesn’t necessarily mean Russia won’t invade Ukraine. More to the point, it doesn’t necessarily mean the end of troubles for technology stocks and other sectors of the market sensitive to interest rate rises. Indeed, inflation and policy tightening remain a bigger threat to stocks,” Razaqzada opined.
There has been some reasonably cheering news relating to Britain’s hard-pressed hospitality sector.
The latest edition of the Coffer CGA Business Tracker, produced in partnership with @DCL_Leisure and @RSMUK shows groups’ total sales in the first month of 2022 were 3% higher than in January 2019.
Read more here: https://t.co/Fk7A2xUZHV pic.twitter.com/a9gEnMO6Jb
— CGA (@CGA_insights) February 15, 2022
The latest Coffer-Peach survey reports rising consumer confidence about safety, with the easing of COVID-19 restrictions helping Britain’s managed pub, bar and restaurant groups to a modest increase in sales in January.
Groups’ total sales in the first month of 2022 were 3% higher than in January 2019. It represents a solid recovery from December, when heavy COVID-19 measures were in place and sales fell 11% below the levels of 2019, Coffer said.
Restaurants were the strongest performing segment of the market in January, recording 4% growth on January 2019, while pubs were up 2%; however, bars saw sales slip 3%, as the requirement for vaccination passes and lingering concerns about crowded venues dented late-night visits.
Continuing the pattern of recent months, trading was significantly weaker in London than elsewhere in Britain. Sales beyond the M25 were up by 6% on January 2019, but they dipped 8% within it, with office workers and tourists slow to return to the capital, the Tracker revealed.
9.50am: AstraZeneca leads London higher
London’s bright start continues although for what it is worth it is lagging most of the other European indices.
That’s probably because of the heavy weighting miners have in the FTSE 100 index. The index is down 57 points (0.8%) at 7,589, with the likes of Fresnillo PLC (LSE:FRES), Rio Tinto PLC (LSE:RIO) and Anglo American PLC (LSE:AAL) among the worst performers.
BHP Group Limited (LSE:BHP), no longer in the Footsie since it went all Aussie on us, is down 0.9% after its results for 2021 which showed an underlying attributable profit of 10.7bn dollars (US dollars – so no that Aussie, then), up 77% on 2020.
Glencore PLC (LSE:GLEN), up 2.6%, continues to defy the trend after its results included news of a mind-boggling US$4bn to be returned to shareholders but the stock is no longer top of the Footsie leader-board; that accolade belongs to AstraZeneca PLC (LSE:AZN), which is 4.2% higher at 8,730p after good news from trials of one of its cancer drugs.
READ AstraZeneca drug could help prolong life of terminally ill prostate cancer patients
Meanwhile, economists and other pundits continue to chew over this morning’s labour market statistics.
“The latest batch of UK labour market data were a mixed bag, consistent with continued tightness despite a softening of economic growth momentum amid the spread of Omicron. On the downside, employment dropped 38k in the three months to December, the first such decline in ten months, to leave the employment rate still 1.0ppt [percentage point] lower than before the pandemic,” said Daiwa Capital Markets.
“In terms of wages, average total pay edged up 0.1ppt to 4.3%3M/Y in December; however, that left it down 0.1%3M/Y in real terms. Moreover, the pickup in nominal terms reflected bonuses, excluding which regular pay slowed a further 0.1ppt to 3.7%3M/Y, the lowest since May 2019, as the temporary distortions associated with composition and base effects continued to pass and that left regular pay down a steep 0.8%3M/Y in real terms, further evidence of the squeeze in living standards even before taxes and household energy bills go up in April,” Daiwa continued.
“At face value, that might suggest that recent BoE concerns of pay pressures have been overdone; however, the 3M/3M annualised rate of nominal regular pay rose to 4.5%, the highest since February and business survey evidence of very strong pay expectations will likely sustain MPC worries of significant second-round effects on wages from current high inflation over the coming year. So, today’s data won’t deter the MPC from hiking Bank Rate again next month,” Daiwa predicted.
Some signs that employment growth is slowing - the first estimate of a 0.4% m/m rise in employee numbers in January was the lowest since April. Note too that the first estimate has been revised down by 0.3pp on average in the last 6m. Still, the labour market looks tight overall pic.twitter.com/W21G53iLS5
— Samuel Tombs (@samueltombs) February 15, 2022
Danni Hewson at AJ Bell also dragged the Bank of England into it in her commentary on this morning’s figures.
“Andrew Bailey might have urged employers not to raise pay in a bid to keep inflation in check but when faced with record vacancy levels, even if the number of new vacancies hitting the market is slowing, employers are having to reach for the cheque book. Workers have been feeling the squeeze with the price of just about everything going up and wage growth over the three months to the end of the year is simply not keeping pace. Early indications for January suggest that’s changing as businesses battle to not only recruit workers but to keep their existing ones with the number of people hopping from job to job reaching record levels.
“Unemployment has fallen, the number of workers on payrolls is now almost half a million above pre pandemic levels but the workforce as a whole is still down by just over that number and economic inactivity levels have also jumped again over the last three months of 2021. There are a number of factors at play from a fall in the number of self-employed workers to a reluctance to return to the workforce by those in the twilight years of their lives. Concerns about Coronavirus might still be at play with older workers drifting out of employment during the pandemic and not being ready to return whilst Omicron posed a threat. With days growing longer and case numbers falling that could start to shift particularly following the government’s decision to scrap the triple lock on state pensions this year which is expected to result in real term falls in income,” Hewson said.
“And inflationary pressure might force many, particularly low paid workers to hunt for extra income, take on additional part time roles or grab more hours in a bid to help cushion their budgets from the worst of the price increases heading down the tracks and with hospitality seeing the biggest increase in job vacancies there is the potential for college and university workers to step into the gaps, but workers will know they have the power, and it could many employers, particularly small businesses in increasingly difficult positions,” she added.
“Because employees aren’t the only ones facing price increases,” Hewson continued with a contemptuous disregard for grammatical conventions.
“Employers are also having to pay more just to keep the lights on and for those battling back from lockdown closures the impact of wage inflation on top of all the other costs will be brutal and here is where there is potential for things to spiral out of control. Employees demand more to cover their costs; employers have to charge more to cover theirs and prices keep heading just one way,” she concluded.
8.35am: Ukraine tensions ease
UK blue-chips have got off to a positive start, fuelled by hopes that diplomatic efforts to avert a war in Ukraine are paying off.
The FTSE 100 was up 41 points (0.6%) at 7,572, with Glencore PLC (LSE:GLEN) leading the way after a well-received set of full-year results.
READ Glencore to return US$4bn to shareholders as profits soar on record high commodity prices
“There is a certain relief in the Ukraine-Russia crisis as the two sides seem willing to continue their diplomatic efforts to avoid a military action. The latter could help reversing a part of yesterday’s aggressive sell-off in the European markets, and the FTSE 100 could outperform its peers on the back of firm energy and oil prices,” suggested Ipek Ozkardeskaya at Swissquote.
The Office for National Statistics (ONS) reported that the number of UK employees on payrolls rose again in January and is now well above pre-pandemic levels.
The UK employment rate increased by 0.1 percentage points on the quarter to 75.5%, with the ONS estimating that 108,000 people joined the workforce in January, sending the number of people on payrolls up to a record 29.5mln. On the other hand, there are far fewer self-employed people around now.
“Our Labour Force Survey shows the number of people in employment overall is well below where it was before COVID-19 hit. This is because there are now far fewer self-employed people,” said Sam Beckett, the head of economic statistics at the ONS.
“The survey also shows that unemployment has fallen again and is now only fractionally above where it was before the pandemic; however over the same period, nearly 400,000 people, mostly the over-50s, have disengaged from the world of work altogether and are neither working nor looking for a job,” she added.
The unemployment rate decreased by 0.2 percentage points on the quarter to 4.1%, while the economic inactivity rate increased by 0.1 percentage points to 21.2%.
“After taking account of recent rises in consumer prices, real total pay fell in the year to October-December 2021, despite a strong recovery in bonuses,” Beckett noted.
7.55am: Transition of self-employed to wage salve status continues
UK unemployment figures are little changed but wage growth has picked up, according to fresh figures from the Office for National Statistics.
The headline unemployment rate was 4.1% in December and for the three months to December, the ONS revealed, which was in line with economists' estimates.
Job vacancies hit a record high of nearly 1.3mln, most than 0.5mln above pre-Covid levels.
Average weekly wages, including bonuses, were up 4.3% in December compared to the year before, from 4.2% in November, and above the consensus forecast of 3.8%.
"With the UK jobs market in decent shape, expect another two rate rises from the Bank of England in quick succession," said economists at ING.
"But to justify the six further rate rises markets are pricing this year, we need to see signs of a wage-price spiral. We aren't convinced that's likely, and policymakers are likely to hike more gradually than investors expect."
6.45am: Further losses expected
The FTSE 100 is expected to extend its losses after a day of heavy selling across most stock markets at the start of the week.
London's blue chip index is seen dropping 12 points on Tuesday after finishing 129 points lower at 7,531.59 the day before - its second biggest one day fall this year.
Overnight on Wall Street, the Dow Jones declined 0.49%, and the S&P 500 index dropped 0.38%, the Russell 2000 dipped 0.46% and the tech-filled Nasdaq remained unchanged.
Across in European Germany's the DAX fell to an eight-month low.
"Losses were widespread across the board as concerns over an escalation on the Ukraine, Russia border prompted a bit of a flight to safety, although some of the losses were tempered by a hope that a continued Russian willingness to talk would head off an incursion into Ukraine," said CMC Markets analyst Michael Hewson.
"This risk off tone initially manifested itself in a move into US treasuries, sending yields sharply lower, however the decline in yields was quickly undone after St. Louis Fed President James Bullard doubled down on his comments last week by expressing conviction that the Federal Reserve should raise rates by 50bps hike in March, with two more of 25bps each by July."
Looking ahead, the latest UK unemployment numbers are due shortly.
6.50am: Early Markets - Asia / Australia
Asia Pacific markets were mostly lower on Tuesday as Japan’s economy expanded 5.4% on an annualised basis in the final quarter of 2021.
However, the quarterly annualised GDP growth was below a median market forecast for a 5.8% gain, according to Reuters.
Japan’s Nikkei 225 fell 0.79% and South Korea’s Kospi slumped 1.03%.
The Shanghai composite in China gained 0.34% while Hong Kong’s Hang Seng index dipped 1.13%.
Australia’s S&P/ASX200 closed 0.51% lower as the Commonwealth Bank brought forward its forecast for the first rise in the record-low 0.1% cash rate from August to June this year, and said it expects a cash rate of 1% by the end of 2022.