- FTSE 100 closes over 226 points higher
- Russia-focused stocks wanted after downplaying Russian connections
- Tullow Oil disappoints
4.50pm: Strong bounce back
The UK's main equity index, heavy with finance and resources stocks, closed sharply higher on Wednesday as bargain hunters rushed back into the market to scoop up beaten-down shares.
The FTSE 100 closed the day 226.61 points, or 3.25% higher at 7,190.72, the session peak, and well above the day's low of 6,964.11.
According to analysts, desire to buy stocks at cheap prices offset worries about the Russia-Ukraine war.
“What we're therefore seeing is a hopeful rally rather than one built on solid foundations but it's the first glimmer of hope we've had in weeks. I'd be surprised if it's sustained for any significant period of time unless we see actual progress towards a ceasefire and Russian exit,” said Craig Erlam, who is the senior market analyst, UK and EMEA, at OANDA.
“It comes at an interesting time as well. Europe this week entered into bear-market territory at the same time as gold came within a few dollars of record highs,” he added.
Erlam believes all this has investors asking themselves if a lot of the escalation is now priced in and whether further downside will be much less severe than what we've seen in recent weeks.
“And if so, whether it's time to dip back in given how discounted the market is compared to the beginning of the year,” said Erlam.
3:50pm: Russian stocks to the fore
The FTSE 100 is just a few points off its intra-day high and has established clear daylight above the 7,100 level.
London’s index of leading shares is up 153 points (2.2%) at 7,117, with a couple of Russia-focused stocks – Polymetal and Evraz – leading the way.
Curiously, both companies seemed to be keen to play down their Russian connections and if the ruse was conceived to spark a rally in their share prices then it has certainly worked with Polymetal up 59% at 146p and Evraz 36% heavier at 105.75p.
Craig Erlam at OANDA wonders, rhetorically, whether investors are taking the view that the worst is already priced in.
“I'm certainly not convinced that this is the case but stocks have fallen a lot in recent weeks and comments from President Zelensky around NATO membership could be viewed as a first and important step towards a compromise between Ukraine and Russia,” Erlam said.
“Perhaps what we're therefore seeing is a hopeful rally rather than one built on solid foundations but it's the first glimmer of hope we've had in weeks. I'd be surprised if it's sustained for any significant period of time unless we see actual progress towards a ceasefire and Russian exit,” he added.
It’s not been a good day for the big oil companies Shell and BP, what with the price of crude going through the floor faster than a Morris dancer practising upstairs in a condemned house.
Mid-cap Tullow Oil PLC (LSE:TLW) is also getting it in the neck, with a bit of added malice as the company’s full-year revenue fell below market expectations.
“With oil prices through the roof, and the crisis in Ukraine likely to keep them that way for some time, struggling to turn a profit as an oil and gas company is a bad look. Tullow Oil disappointed the market this morning with an US$81mln net loss,” said Laura Hoy at Hargreaves Lansdown.
“Asset sales helped the group get costs under control but it also meant the group exited a potentially lucrative position in Namibia. Plus, Tullow’s not been expanding as quickly as hoped in Ghana, so its not been able to capitalise on the buoyant price environment quite as readily as expected,” she added.
The shares were down 13% at 54.22p.
The day’s biggest faller was Gfinity, which saw its share price halve after a profit warning and a heads-up that a fundraising is on the way.
2.50pm: US stocks off to a flyer
As expected, US stocks have got off to a flying start.
The Dow Jones 30 is up 628 points (1.9%) at 33,261 and the S&P 500 is 83 points (2.0%) firmer at 4,254.
In the UK, the FTSE 100 has recovered some of its mojo after a lunchtime power nap and is up 131 points (1.8%) at 7,096.
You can tell it is in, to use the market pundit’s cliché, a “risk-on” day by the fact that gold is trading 2.5% (US$51) lower at US$1,992.30 an ounce.
Brent crude is getting sold off even more enthusiastically, with the price of the continuous contract on the futures exchange down US$6.01 (4.9%) at US$117.69 an ounce.
“Volatile market conditions are not going anywhere until Putin ends the invasion of Ukraine,” predicted Fawad Razaqzada at Thinkmarkets.
“For now, markets are relieved by the fact we haven’t had any fresh bearish news since yesterday’s announcement of a ban in oil imports from Russia. The markets were severely oversold, and any piece of good news would have always been amplified in terms of market reaction, which is what we have seen so far today. Also, let’s not forget that this is also typical of a bear market when you sometimes see multiple percentage point gains in a short period of time as the shorts are squeezed before the rally runs out of steam and the downward trend resumes,” he added.
1.45pm: Russia-focused stocks rally
The FTSE 100’s morning gains are slowly being whittled away but it is still sitting on a hefty rise, albeit one that is put in the shade by the FTSE 250.
While the FTSE 100 is up 113 points (1.6%) at 7,077, the mid-cap FTSE 250 is 621 points (3.2%) to the good at 19,838.
Russian gold miner Petropavlovsk PLC (LSE:POG), up 25% at 3.75p, is leading the advance while another Russia-focused stock, Wizz Air Holdings PLC (AIM:WIZZ), is 15% higher at 2,901p.
Transport firm National Express Group PLC (LSE:NEX) is 12% firmer at 215.6p after its hopes of taking over Stagecoach Group PLC (LSE:SGC) hit the buffers.
After the Competition and Markets Authority said it would look into any merger between National Express and Stagecoach, the latter found another willing buyer, Pan-European Infrastructure III, an infrastructure fund managed and advised by DWS Infrastructure.
Stagecoach shares were 37% higher at 104.6p after its board recommended the 105p per share offer.
12.30pm: US markets tipped to open higher
US stocks are expected to open sharply higher, recovering from falls on Monday and Tuesday that saw the blue-chip Dow Jones Industrial Average enter correction territory.
While a US ban on all Russian fuelled a further rise in energy prices, adding to global growth and inflation concerns, reports that Ukraine will no longer pursue NATO membership and is open to dialogue have raised hopes of a settlement of the Ukraine conflict.
Dow futures rose 1.5% on Wednesday in pre-market trading, while those for the broader S&P 500 index gained 1.64% and the tech-heavy Nasdaq added 2.05%.
Stocks closed lower on Tuesday after a volatile day as fears of recession and rising inflation increased after US President Joe Biden announced a ban on imports of Russian oil and gas while the UK said it will phase out Russian energy imports by the end of the year.
The Dow slipped 0.56% to 32,633, while the S&P 500 lost 0.72% to 4,171 and the Nasdaq was down by 0.28% at 12,796.
“The early respite in US markets proved brief indeed, as the confirmation of a ban on Russian oil sapped investor optimism once more,” commented Richard Hunter, head of markets at interactive investor. “The oil price rose again on prospects of diminishing supply and now stands ahead by 68% in the year to date.”
With the EU also looking to end its reliance on Russian gas, Hunter noted that the near term prospects for inflation remain extremely high and on top of what were already elevated levels.
“Perhaps unsurprisingly global growth concerns ensued, with the main indices retreating again,” Hunter added. “Some strength in the bigger tech names was not enough to prevent another Nasdaq decline, with the index moving further into bear market territory and now down by 18.2% in the year to date. The Dow Jones and S&P 500 also remain in correction territory, having lost 10.2% and 12.5% respectively in 2022.”
11.25am: Flood of positive corporate news flow
While the focus of markets understandably remains on events in Ukraine, it has been a good day for many FTSE 100 companies.
The likes of Evraz PLC (LSE:EVR), Prudential PLC (LSE:PRU), Legal & General Group PLC (LSE:LGEN), Coca-Cola HBC AG, Polymetal International PLC (LSE:POLY) and Electrocomponents PLC (LSE:ECM) have all issued statements that have triggered chunky share price gains, contributing towards a 122 point advance by the FTSE 100 to 7,086.
Coca-Cola HBC was up 6.7% to 1,558.5p after it said it respected The Coca-Cola Company (NYSE:KO)’s decision to suspend its business in Russia and it is working closely with the US company to suspend operations and continues to provide support on the ground in Ukraine in partnership with The Red Cross.
Electrocomponents PLC (LSE:ECM) jumped 9.8% to 953p after a trading statement that revealed trading had picked up strongly after a slow start to 2022, prompting the electronic components provider to upgrade full-year results.
Electrocomponents PLC (LSE:ECM) - Upgrading to ‘Outperform’ - https://t.co/CYwyYzWBha
— Davy Research (@DavyResearch) March 9, 2022
10.30am: Russian sovereign debt gets junkier
Debt rating agency Fitch has warned that Russia is close to defaulting on its debts.
Given the track record of the debt rating agencies back in the first decade of the current millennium this might not be the unalloyed good news that opponents of Russia’s invasion of Ukraine hope it will be.
Fitch has downgraded Russian sovereign debt to “C” from “B”, pushing the bonds further into “junk” territory.
“The further ratcheting up of sanctions, and proposals that could limit trade in energy, increase the probability of a policy response by Russia that includes at least selective non-payment of its sovereign debt obligations,” Fitch said.
Russia is due to make its next debt repayment on March 16.
This morning, the UK government announced new aviation sanctions against Russia. Given these sanctions were instigated by Grant Shapps this might not be the unalloyed good news that opponents of Russia’s invasion of Ukraine hope it will be.
“We will suffocate Putin's cronies’ ability to continue living as normal while thousands of innocent people die,” Shapps said in a tweet that announced the government is making it a criminal offence for any Russian aircraft to enter UK airspace.
$MTC Mothercare suspends substantial Russian business https://t.co/GRxDQ53Ncf @mothercareuk #MTC #Katie_Proactive
— Proactive (@proactive_UK) March 9, 2022
Meanwhile, Mothercare PLC (LSE:MTC) shares slumped 26% to 10.05p after it said all of its business in Russia, including shipment of all products has been suspended.
“Our local partner has confirmed that it will be immediately pausing operations in some 120 stores and online. Russia represents around 20-25% of Mothercare's worldwide retail sales and was previously expected to contribute around £0.5 million per month to group profit,” the retailer said.
The FTSE 100 was up 143 points (2.1%) at 7,107.
9.25am: Resource companies left behind as market rallies
As pressure builds for more companies to boycott Russia – McDonald’s might be the final straw (and milkshake) – equity investors are feeling happier with life.
The FTSE 100 was up 145 points (2.1%) at 7,108 in mid-morning trade, despite resource companies being massively out of favour.
Miners Fresnillo PLC (LSE:FRES), Rio Tinto PLC (LSE:RIO) and Glencore PLC (LSE:GLEN) were all trading 2% lower or more while the oil giants Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.) were down 1.5% and 1.4% respectively.
“Russia and Ukraine account for a significant share of critical commodity production. It’s important to consider second- and third-order consequences, including those resulting from sanctions and other associated actions, that could reverberate through markets for the foreseeable future,” said James Solloway, the chief market strategist at asset manager SEI.
“We believe the primary impact on economic growth will be transmitted via commodity markets, with Europe sustaining the greatest impact, although GDP growth will likely slow in the US as well.
“While the monetary and fiscal response will likely be limited, the odds of an aggressive tightening of monetary policy this year are now considerably lower. There’s a gap between the market-implied terminal Fed funds rate and the Fed’s own projections, and we suspect the Fed’s higher terminal rate is more likely to prevail.
“Even so, milder tightening could mean that the Federal Reserve remains behind the curve on taming inflation. We still think market expectations for a return toward more normal inflation conditions over the next couple years will need to be revised upward,” Solloway said.
Shares in insurance giant Prudential PLC (LSE:PRU) were 5.9% higher at 1,088.5p after the company’s full-year results got the thumbs up.
“Like a slimming club member celebrating reaching their goals, newly streamlined Prudential has marked its first set of numbers since offloading both its UK and US businesses by beating expectations,” said Russ Mould at AJ Bell.
“While the UK arm is firmly in the rear-view mirror after a 2019 spin off, the US division remained a drag on performance in 2021 until the demerger completed in the autumn.
“There is now real clarity to the strategy as the company is purely focused on Asia and, to a lesser extent, Africa. These insurance and investment markets are much less mature and should allow Prudential to grow more rapidly than rivals focused on the West as it sells financial products to these underserved populations,” he added.
Sector peer Legal & General Group PLC (LSE:LGEN) was also applauded for its full-year results, which prompted a 4.7% increase in the share price to 256.6p.
“L&G has delivered record results on a number of fronts, with profit broadly in line with City expectations,” said interactive investor’s Keith Bowman.
“A combination of economic and geopolitical tensions offer some uncertainty around the outlook. Intense competition in the asset management industry is also worth remembering, as is the group’s exposure to the cyclical housing market through its capital investment business.
“On the upside, L&G’s exposure to ageing demographics and pension provision remains central. An investment management business with over £1 trillion of assets under management is no small player, and its five business divisions inject some degree of diversity. For now, and with its shares sat on a historic and estimated future dividend yield of over 7%, analyst consensus opinion continues to point towards a buy,” he added.
8.30am: Whipsaw volatility continues
The FTSE 100 jumped higher at the hump-day open as Russian-related stocks, travel companies and banks all rebounded.
London's blue-chip index rose 135 points or almost 2% in opening trades to 7,099.69.
Russia-focused precious metals miner Polymetal International PLC (LSE:POLY) topped the leaderboard with a 54% leap, though it is still down 88% from the day before the invasion of Ukraine.
Steel basher Evraz PLC (LSE:EVR) was up 17% as it put out a statement this morning saying that for the purposes of the EU Russia sanctions, "the company does not consider itself to be an entity owned by, or acting on behalf or at the direction of, any persons connected with Russia and thereby caught by such legislation".
British Airways owner IAG, engine maker Rolls-Royce and hotel operators Whitbread and InterContinental Hotels were also in the top 10.
Lloyds Banking Group, NatWest and Prudential were also in there.
6.45am: Positive start predicted
The FTSE 100 is predicted to start Wednesday positively as whipsaw volatility continues across global equity markets.
CFD firm IG Markets is reckoning on a 70-point improvement, making a price of 7,042 to 7,045 with just over an hour to go until the start of trading.
It comes after a plan for a European Union bond issue was floated as a means to ease pressure amidst soaring energy prices and an evident determination to end Europe’s dependence on Russian oil and gas imports.
“As straw clutching goes it was quite a leap, but such is the fickle nature of sentiment, the prospect of a new stimulus plan in the wake of all this volatility was seen as a welcome development, albeit with the enormous caveat that, as with anything EU related, the devil would be in the detail,” said Michael Hewson, analyst at CMC Markets, who also highlighted the reversal of US equity gains last night.
“This is likely to be typical of market moves from here on in as the ebb and flow of headline risks continues to pull markets this way and that,” he added.
On Wall Street, last night, the Dow Jones ended the session down 185 points or 0.56% at 32,632 whilst the S&P 500 was off 0.72% closing at 4,170.
The Nasdaq nipped 0.28% lower to 12,795 whilst the small cap focussed Russell 2000 index managed a 0.6% rally to 1,963.
In Asia, meanwhile, Japan’s Nikkei was down 0.3% at 24,717 and Hong Kong’s Hang Seng was 1.73% lower at 20,406. The Shanghai Composite dipped 1.27% to 3,251.
Around the markets
- The pound: US$1.3117, up 0.11%
- Gold: US$2,050 per ounce, down 0.12%
- Silver: US$26.65 per ounce, up 1.17%
- Brent crude: US$131.30 per barrel, up 6.5%
- WTI crude: US$126.32 per barrel, up 5.7%
- Bitcoin: US$41,531, up 8.8%
- Ethereum: US$2,716, up 8.2%