- FTSE 100 ends up 10 points
- Smith & Nephew profits double
- Oil close to US$100 a barrel
4:50pm: FTSE 100 ends higher, US stocks down midday
The FTSE 100 finished the day on an up note, gaining 10 points, or 0.1%, to 7,494, even as Russian president Putin sent troops into eastern Ukraine.
“Oversold stock markets have found some relief in the short-term, but prevailing risk off sentiment should gain the upper hand soon once the next development in the Russia-Ukraine crisis arrives,” IG chief market analyst Chris Beauchamp said.
HSBC Holdings plc shares were little changed despite the company reporting a jump in its yearly profit to £13.9 billion and saying it plans to buy back more of its shares.
3.55pm: UK market heads higher into the close
A day that started with investors fearing the worst as Russia ordered troops into two breakaway areas of Ukraine has turned out less traumatic for markets than expected.
There is no denying the uncertainty and a huge dollop of volatility, but leading UK shares remain in positive territory once an early fall was out of the way.
Heading into the close the FTSE 100 is up 32.05 points or 0.43% at 7516.38, despite opening declines on Wall Street, as Western leaders appear reluctant to be too gung-ho in tackling the situation.
Even a continuing rise in gas prices and a move by crude towards US$100 a barrel and a seven year high failed to do much damage.
The UK blue chip index was also helped by positive reactions to a number of company updates.
Smith & Nephew PLC (LSE:SN) was the clear winner here, up 8.48% after it revealed operating profits had doubled and unveiled its new chief executive.
Intercontinental Hotels Group PLC (LSE:IHG) also pleased investors with its update and added 4.38%.
But it was not all rosy for those reporting, with Hargreaves Lansdown PLC (LSE:HL.) down 15.6% and Coca Cola HBC AG (LSE:CCH) losing 3.37%.
Elsewhere Russian connections looked likely to hit companies hard but even here there was a recovery, on the basis that the UK sanctions announced today appear not to be that hard-hitting after all.
So Evraz PLC (LSE:EVR), once one of the biggest fallers, is now up 6.37% while Polymetal International PLC (LSE:POLY) has put on 3.27%.
Elsewhere easyJet plc (LSE:EZJ) has climbed 2.86% on talk it could rejoin the FTSE 100 next month at the next reshuffle.
As if it were a normal day with no prospect of war in Europe, even broker comments had an effect.
In particular Severn Trent PLC (LSE:SVT) lost 3.95%, United Utilities Group PLC (LSE:UU.) fell 3.45% and Pennon Group PLC (LSE:PNN, OTC:PEGRY) dropped 3.48% after downgrades from analysts at Jefferies.
3.20pm: Markets uncertain as investors try and assess Ukraine situation
US stocks wavered on Tuesday after Russian President Vladimir Putin sent troops to two breakaway areas of Ukraine, and the West reacted by threatening sanctions.
Germany added to the pressure on Russia by suspending approval of the Nord Stream 2 gas pipeline between the two countries.
In New York, the Dow Jones Industrial Average shed 0.7% or 250 points at 33,829, while the broader S&P 500 and the Nasdaq Composite dipped 0.2% and 0.3%, respectively.
“Russia still claims to desire a diplomatic solution to the crisis in Ukraine, despite being the catalyst for the latest escalation when recognizing the independence of two separatist regions,” noted Craig Erlam, senior market analyst, UK & EMEA, OANDA. “That decision has invited a barrage of criticism and sanctions will follow today which will no doubt damage diplomatic efforts that appeared to be making headway earlier this week.”
As the crisis deepens though, “we will continue to see risks being priced in accordingly, and nowhere is that more evident than in Russian assets and the oil and gas markets,” Erlam noted. "The move by Germany to halt certification of Nord Stream 2 following the events of the last 24 hours is not entirely surprising but does block what would have otherwise been one passage to alleviating pressures in the gas market in the coming months."
On the corporate front, Macy’s reported a better-than-expected holiday quarter, sending its shares soaring by 9.3% on Tuesday.
Meanwhile, investors are gauging the Federal Reserve rate hike in the upcoming March15-16 meeting, with expectations of at least a 0.25% point move– continuing to put pressure on the volatile markets.
Back in the UK, the FTSE 100 is up 34.70 or 0.46% at 7519.03 as investors await further developments in Ukraine.
3.13pm: US economy rebounds but pricing pressures grow
The US economy is recovering from the pandemic, according to the latest snap purchasing managers reports.
The IHS Markit PMIs for February came in better than expected across the board, but there was also a record rise in average prices charged for goods and services.
This is likely to make a rate rise from the Federal Reserve next month more likely.
US Economy Rebounds From #Omicron Wave, But Output Prices Rise At Survey Record Pace - @IHSMarkitPMI https://t.co/aRFGMttbvP pic.twitter.com/0KuEZjInJw
— LiveSquawk (@LiveSquawk) February 22, 2022
Chris Williamson, chief business economist at IHS Markit, said: “The pace of economic growth accelerated sharply in February as virus containment measures, tightened to fight the Omicron wave, were scaled back. Demand was reported to have revived and supply constraints, both in terms of component availability and staff shortages, moderated
“With demand rebounding and firms seeing a relatively modest impact on order books from the Omicron wave, future output expectations improved to the highest for 15 months, and jobs growth accelerated to the highest since last May, adding to the upbeat picture.
“The service sector rebounded especially impressively, accompanied by a more muted upturn in manufacturing. Goods producers remain hamstrung by supply shortages which, although easing to the lowest since last May, continued to severely limit production growth, resulting in a further large rise in backlogs of work.
The supply constraints also contributed to a further marked increase in firms’ costs, which rose yet again at another near-record pace in February. Increasing numbers of companies sought to pass these higher costs on to customers, resulting in the largest increase in average prices charged yet recorded by the survey.
“With growth rebounding sharply amid resurgent demand, and price pressures rising again to an all-time high, the survey will add to expectations of a more aggressive policy tightening by the FOMC.”
On the other hand the latest US consumer confidence figures showed a decline.
US Consumer Confidence Fell In January - @Conferenceboard https://t.co/ilJcLSdDUO pic.twitter.com/Hz3FXhLFsy
— LiveSquawk (@LiveSquawk) February 22, 2022
1.03pm: Company updates support market
Leading shares seem to be taking the prospect of conflict in Ukraine relatively calmly at the moment.
The FTSE 100 is currently up 23.2 points or 0.31% at 7507.53, having earlier fallen as low as 7365.
A couple of positive responses to results have helped, with Smith & Nephew PLC (LSE:SN) up 5.22% after its operating profits doubled and Intercontinental Hotels Group PLC (LSE:IHG) 3.93% higher as it moved back into profit and said it would pay a dividend for the first time since 2019.
12.16pm: Modest rate rises ahead - Bank of England deputy governor
UK consumers should be braced for further interest rate rises, albeit modest ones, according to deputy Bank of England governor Dave Ramsden.
The Bank has already increased rates in December from 0.1% to 0.25%, and in February to their current 0.5%.
Speaking at the National Farmers' Union annual conference in Birmingham, Ramsden - who voted for a 0.5 percentage point increase in February - said: "Like the rest of the [Bank's monetary policy committee] I judge that if the economy develops broadly in line with the February.. forecast, some further modest tightening in monetary policy is likely to be appropriate in the coming months.
"The word “modest” is significant here though – I do not envisage Bank Rate rising to anything like its pre-2007 level of 5% or above, let alone to the kind of levels we used to see before the MPC was formed in 1997.
"Of course there are always uncertainties around any forecast and new shocks can arise – we did not foresee the recent rise in energy prices, and as we meet today the crisis in Ukraine is intensifying – and so we should remain humble about the possibility that things might turn out differently."
11.45am: US investors return after Monday's break in nervous mood
US stocks are expected to open sharply lower after the Presidents Day holiday on Monday, after Russia ordered troops into two breakaway regions of eastern Ukraine, defying threats of sanctions from the West.
Gold continues to be in demand as investors seek a haven amid the uncertainty and rose to its highest in more than eight months, while Brent Crude Oil (LSE:BRENT) (Brent Crude Oil (LSE:BRENT)) is now trading above US$98 a barrel, adding to inflation concerns.
Futures for the Dow Jones Industrial Average declined 0.23% in Tuesday pre-market trading, while those for the broader S&P 500 index fell 0.92% and the tech-heavy Nasdaq shed 1.77%.
Markets ended last week in the red as Ukraine-Russia tensions escalated and as investors continued to assess the Federal Reserve's upcoming decision on interest rate hikes amid geopolitical uncertainty.
At the close on Friday, the Dow was 0.68% lower at 34,079, while the S&P 500 shed 0.72% to 4,349 and the Nasdaq declined 1.23% to 13,548.
“Not only have Putin’s actions increased the risk of the biggest war since 1945 but they have also exacerbated the inflationary problem by pushing energy prices higher, exacerbating one of the market’s biggest worries this year,” commented Victoria Scholar, head of investment at interactive investor.
“The intensifying crisis between Russia and Ukraine has raised concerns about the supply disruptions that would ensue as sanctions look set to cripple Russia, the world’s second-largest oil exporter and the world’s top natural gas producer.”
If Putin continues his aggression and the threat of war becomes a reality, Scholar said oil prices could easily push beyond $100 towards $120 a barrel to fresh highs not seen since 2014.
Scholar added: “Amid the global market sell-off investors are flocking towards safety assets to hide from the storm with gold catching a bid while the Japanese yen is also in demand. Gold has broken above key resistance turned support at $1900 towards levels not seen since January 2021.”
Meanwhile in the UK, the FTSE 100 is just about holding in positive territory, up 10.72 points at 7495.05.
11.11am: Inflation concerns grow for manufacturers - CBI
Before investors had Ukraine on their minds, inflation was one of the over-riding worries.
And a new report from the CBI shows that is not going to go away.
The number of UK manufacturers expecting price rises in the next three months is at its highest level since December 1976, according to the CBI's latest industrial trends survey.
The balance rose to the +77% in February 2022, compared to +78% in December 1976.
On the plus side, UK manufacturing output growth picked up in the three months to February,+26% from +14% a month earlier.
Output increased in 13 out of 17 sectors, with growth driven by the chemicals and food, drink and tobacco sub-sectors.
Total order books were strong in February (+20%, from +24% in January), while export order books improved slightly and remained above their long run average (-7%, from -10% in January; average of -19%).
Manufacturers expectations for price growth in the quarter ahead were at their strongest since December 1976. pic.twitter.com/61fKnSCzBv
— CBI Economics (@CBI_Economics) February 22, 2022
Anna Leach, CBI deputy chief economist said: “Manufacturers will be buoyed by strong order books and output growth, but amid ongoing cost pressures, almost 4 in 5 firms expect to increase prices in the next three months.
“With high inflation dampening growth prospects in the wider economy, the Government must use the Spring Statement to help get businesses investing more, supporting higher growth, productivity and wages.”
10.27am: Russia-focused miners under pressure
After a downbeat start, leading shares have managed to edge into positive territory.
The FTSE 100 is now up 2.72 points at 7487.05, but things remain volatile.
Commodity companies are among the day's fallers, especially those with exposure to either Russia or Ukraine.
Anglo-Russian miner Polymetal International PLC (LSE:POLY) is down 4.9% while gold specialist Petropavlovsk PLC (LSE:POG) has dropped 11.69%.
Steel producter Evraz PLC (LSE:EVR) has recovered some ground and its now down 0.58%.
Russ Mould, investment director at AJ Bell said: "The threat of Russia invading Ukraine was clearly visible at the end of 2021, but most investors were more concerned about inflation and how fast interest rates might go up. Now the threat of war is very real, and investors will need to add it to their growing list of things to worry about.
"This could prompt another bout of panic and lead to heightened market volatility."
Elsewhere Wizz Air Holdings PLC (AIM:WIZZ), which is focused on Eastern Europe, is down 3.63%.
Airlines are also under pressure as soaring crude prices will increase their fuel costs.
10.12am: Water companies sink after downgrades
War in Ukraine may be imminent but markets are still influenced by other things as well.
In the case of the water companies, that happens to be downgrades by analysts at Jefferies.
They have cut United Utilities Group PLC (LSE:UU.) from buy to hold, and Severn Trent PLC (LSE:SVT) and Pennon Group PLC (LSE:PNN, OTC:PEGRY) from hold to underperform.
That has left United down 3.12%, Severn off 2.96% and Pennon 4.14% lower.
10.01am: Sanctions will hit Russia hard, says UK
Markets seem to have stablised a little as investors weigh up the latest developments in Ukraine.
Boris Johnson has promised a "barrage" of UK economic sanctions on Russia, saying they would hit "the economic interests that have been supporting Russia's war machine."
He added: "[The sanctions} will hit Russia very hard and there is a lot more that we are going to do in the event of an invasion.
"Be in no doubt that if Russian companies are prevented from raising capital on the UK financial markets, if we unpeel the facade of Russian ownership of companies, of property, it will start to hurt."
The FTSE 100 is currently down 37.98 points or 0.51% at 7446.35.
Neil Shearing, group chief economist at Capital Economics, said: "The economic and market consequences of a war between Russia and Ukraine will depend on the severity of the conflict, and the response of the West. But in most cases the economic impact on countries beyond Russia and Ukraine is likely to be limited. The most significant consequence is likely to be that it will add to inflation pressures this year."
He added: "In a worst case scenario, we estimate that oil prices could rise to US$120-140 a barrel. European natural gas prices are also likely to rise further. Were this to happen, it would add around 2%-pts to headline inflation (relative to our current baseline) in advanced economies this year, with Europe hit particularly hard. In normal times, central banks would tend to look through an energy-led rise in inflation, but given the current high rates of inflation, and corresponding concerns about it feeding higher inflation expectations, it’s possible that this adds to the list of reasons for policymakers to raise interest rates.
"Finally, while a lot of bad news is now priced into Russian financial markets, this doesn’t appear to be the case elsewhere. Most of the sell-off in global equities this year can be attributed to the hawkish shift by the world’s major central banks. This suggests that there is still significant downside for global stock markets (and upside for safe havens, including US Treasuries) if the conflict escalates. It could also reverse this year’s pattern of European equities outperforming those in the US."
At the moment Russia's RTS index is unsurpringly bearing the brunt of investor concerns, and is down 7%.
9.16am: Inflation leads to record UK debt repayments in public finances
More on the UK public finances, which saw the first budget surplus in January since before the pandemic but also saw record debt repayments of £6.1bn thanks to rising inflation.
Laith Khalaf, head of investment analysis at AJ Bell, said: “Inflation is a double-edged sword for government finances. On the one hand rising prices and wages increase the tax take, but at the same time the government has to shell out more to service the £500bn of index-linked gilts it has used to fund its spending. The latest figures from the ONS showed that interest payments on these RPI-linked gilts pushed government debt interest up to £6.1bn in January, up from £1.6bn in the same month last year. The bad news is that there’s more inflation in the pipeline, which is only going to send this number in one direction.
“Inflation also means rising interest rates, which increases the bill the government has to pay on the gilts held in the QE scheme. If that’s not enough, inflation has pushed up the yield on conventional gilts, which means the government now also has to pay more when it issues fresh debt. All that could leave the government facing a cost of borrowing crisis if inflation persists at high levels.
“As long as the economy is motoring along, the cash coming into the Exchequer should help to offset the higher interest payments on the government’s debt mountain, particularly in light of the tax rises that are coming in this April. Indeed, the public finances recorded a surplus of £2.9bn in January, thanks to self-assessment tax receipts. While this is below the £9.9bn surplus recorded in January 2020, before the pandemic, it’s still a marked improvement on last year’s £2.5bn shortfall, especially when considering that many of the taxes collected will be for the tax year spanning from April 2020 to April 2021, which was a pretty bleak period for economic activity.
“There’s more good news for the Chancellor in that so far this fiscal year, borrowing is running £17.7bn below the latest OBR forecast, which should free up some money in the forthcoming Budget. Likewise the reduction in COVID-19 support and testing announced by the Prime Minister should also alleviate pressure on the government’s finances. However the OBR will also have to factor in the worsened outlook for inflation, and with that the expectation for the Bank of England to raise interest rates aggressively this year. The increased cost of borrowing could well spoil the Chancellor’s party on Budget day.”
8.42am: Investors cautious as they await Ukraine developments
After an early knee-jerk reaction to the growing crisis in Ukraine, leading shares have recovered from their lows.
The FTSE 100, having dropped as low as 7365, is now down 37.05 points or 0.5% at 7447.28 as investors await developments.
Smith & Nephew PLC (LSE:SN) is leading the way after its positive update, now up 2.4%.
And proving that there is always someone to benefit from disruption, the oil companies are providing support as crude continues to climb.
But Russian mining group Evraz PLC (LSE:EVR) is, not surprisingly, among the fallers as we await sanction details, down 4.01%.
8.31am: UK sees first budget surplus since pandemic began
Closer to home the UK has recorded its first monthly budget surplus since the pandemic began.
Public sector net borrowing showed a £2.9bn surplus in January, and although this was less than the £3.5bn that economists had been expected, it was still the first positive month for the public finances since January 2020.
The numbers benefited from higher than expected income tax and PAYE receipts as the labour market recovered from the pandemic.
Whilst welcoming the figures, chancellor Rishi Sunak said: "Our debt has increased substantially and there are further pressures on the public finances, including from rising inflation."
8.19am: Markets fall as investors await sanction news
With all eyes on the situation in Ukraine, leading shares have opened sharply lower.
The FTSE 100 is down 62,86 points or 0.84% at 7421.47 as the West scrambled to respond to Russia ordering troops into the Donbas and Luhansk regions in Ukraine, bringing the prospect of conflict a step closer.
Investors are waiting to see what sanctions will be imposed on Russia, and how effective they will be.
UK health secretary Sajid Javid told Sky News that "You can conclude the invasion of Ukraine has begun." He said sanctions would be announced in Parliament and would be "as targeted as possible to the people that are responsible for this flagrant violation of international law."
Meanwhile oil has jumped higher on concerns that any conflict would cause supply issues, with Brent crude up 2.47% at US$97.75 a barrel and West Texas Intermediate up 3.72% at US$94.46.
Ipek Ozkardeskaya at Swissquote said: " A concrete military action in Ukraine would mean a severe disruption to energy supplies - and other commodities, and should gather enough momentum to send the barrel of crude above the US$100 mark."
So Shell PLC (LSE:SHEL, NYSE:SHEL, EURONEXT:SHELL), up 1.44%, and BP PLC (LSE:BP.),0.58% better, are bucking the downward trend.
As is Smith & Nephew PLC (LSE:SN), up 4% after its full year operating profits doubled to US$593mln.
The company also announced that Dr Deepak Nath will join from Siemens Healthineers to become its new chief executive in April. He will take over from Roland Diggelmann, who is stepping down by mutual agreement.
Meanwhile gold, a haven in times of crisis, is up to US$1910 an ounce.
7.08am: Ukraine escalation set to send markets lower
FTSE 100 is expected to open sharply lower as Russia ordered its troops into two rebel states in eastern Ukraine and recognised their independence.
Financial spread betters were calling Footsie down 100 points an hour before trading got underway to follow a 29 point fall on Monday at 7,484.
Oil prices surged higher on the news, which has seen Russia sign treaties with the two regions that give it the right to build military bases in both areas, while equity markets around the world tumbled.
Western countries immediately condemned the move with the UK, the US and Europe all reportedly to impose more sanctions according to the BBC and that will be targeted at people and organisations linked to the country.
Ukraine's foreign minister was reported as saying he had been assured of a "resolute and united" response from the EU.
Ipek Ozkardeskaya, Senior Analyst at Swissquote said: “The latest turn of events narrows the chances of a Russian pullback, and the window for diplomacy is almost shut.
“The US ordered new sanctions on Russia and the new Russian-backed republics; Europeans pledged to respond as well. This is the worst escalation since the Cold War.
“After the US-China trade war and a global pandemic, the Russian crisis is the next big thing on the world’s agenda. Unfortunately, governments and central banks have limited munition left to fight back a war-induced global recession.”
How will HSBC match up to bank rivals?
Company news is likely to take a backseat to the geopolitics today but results due include finals and fourth-quarter numbers from HSBC and Smith & Nephew.
-updates spread bet opening call -