- FTSE 100 rises 57 points
- 'Positive developments' in talks, says Putin
- Evraz non-executive directors resign en masse
4:50pm: FTSE 100 ends higher, US stocks mixed midday
The FTSE 100 finished the day on an up note, gaining 57 points, or 0.8%, to 7,156, as construction and manufacturing boosted the UK’s gross domestic product (GDP) by 0.8% in January.
“A small recovery is in play across stock markets, while oil prices have managed to find support for the time being,” IG chief market analyst Chris Beauchamp said.
“Investors might find that trying to build a rally on comments from Vladimir Putin is a bit of a fools’ errand, but that has been the theme of the day,”
Beauchamp added.Notably movers included shares of Pearson PLC (LSE:PSON) (Pearson PLC (LSE:PSON)), which surged more than 19% after the UK education publisher rejected a £7 billion takeover bid from private equity group Apollo.
3:35pm: Sanctions to crank up
The G7 nations, Canada, France, Germany, Italy, Japan, the UK and the US are said to be planning further sanctions to crank up the pressure on Russia and Vladimir Putin.
It hopes to isolate the Kremlin further, reportedly considering stripping it of its ‘most favoured nation’ (MNF) status under World Trade Organisation (WTO) rules.
If this scenario takes place, further tariffs would be imposed on importing Russian goods to discourage trade.
According to sources close to the matter, an announcement could be made today over the decision.
Current tariffs on Russian goods stand at roughly 3%, with that figure likely to increase tenfold should the action take place.
3.00pm: UK's trade deficit feeling the squeeze
The UK’s trade deficit is under pressure as rising natural gas prices put a squeeze on the trade balance.
Natural gas imports remained elevated in January at £5.2bn, considerably above the average of £0.8bn over the last three years, albeit January’s figure was down slightly compared to December.
“While the value of the U.K.’s natural gas exports has risen too, it has offset only a small fraction of the rise in imports. As a result, the natural gas trade deficit held steady at £4.7bn in January, well above the 2015-to-19 average of £0.4bn,” said Gabriella Dickens, senior UK economist at Pantheon Macro.
The value of imports surged to £52.2bn, up from £42.9bn, but the rise in natural gas prices has widened the deficit further.
Exports suffered in January due to the Omicron variant causing international trading partners to re-impose COVID measures, falling to £25.7bn from £30.5bn in December.
“The recent jump in prices means that real goods exports were a whopping 19% below their 2018 average level. So U.K. exporters’ share of global markets has decreased substantially since 2018,” Dickens adds.
“Looking ahead, a continued rise in the value of imports likely will lead to a further widening of the trade deficit this year. The value of natural gas imports looks set to increase further, due to the surge in futures prices following Russia’s invasion of Ukraine. In addition, a recovery in global car production this year, as supply shortages ease, will boost imports more than exports.”
2.35pm: Some analysts remain cautious over Putin's comments
Vladimir Putin’s comments over progress in talks with Ukraine saw the markets bounce, with the Footsie 74 points up, but some analysts are refusing to get carried away over the “untrustworthy” leader.
“We were already seeing stock markets making cautious gains in morning trade but they were given a boost by comments from Vladimir Putin,” said Craig Erlam, senior market analyst at Oanda.
“While I would love nothing more than to believe what he said to be true, I would caution that Putin has said a lot in recent weeks, almost all of which has been untrustworthy.”
“With that in mind, I'm hesitant to feel in any way optimistic and while we have seen a bump in the markets, it would appear I'm in the majority on this one."
“That said, stock markets have made decent recoveries this week after enduring heavy losses in the weeks before. It's too early to get carried away but more comments like this from all sides could spur some relief moves.”
“It will be interesting to see how investors behave into the close though given the heightened level of weekend risk.”
“We're continuing to see Russia intensify its attack on Ukraine and Western sanctions are increasing all the time. That may encourage some caution as we near the end of the day.”
2.02pm: Pearson rejects Apollo's proposals
Today’s top gainer, Pearson PLC (LSE:PSON), responded to Apollo's earlier release and confirmed it rejected the latest proposal, causing the share price to surge 22% to 794p.
It rejected Monday's "unsolicited, preliminary and highly conditional proposal" from the private equity firm of 854.2p a share, having turned down a similar proposal in November of 800p per share.
It said that the proposal "significantly undervalued the company and its future prospects."
The board of the publishing and education services business said in a statement that it is "confident that the lifelong learning strategy set out in March 2021 will create sustainable, long-term value for Pearson stakeholders."
1.40pm: US preview
The Footsie is maintaining its position just above 7200 and is on course for at least a 3% gain this week.
US stocks are set for a rally, with futures for the Dow Jones Industrial Average and S&P 500 both up around 0.9%, while the tech-powered Nasdaq-100 is heading for a 1.2% rebound.
All three major US indexes remain on track for weekly losses of at least 1%.
Wall Street fell overnight after cease-fire talks between Russia and Ukraine yielded little progress and data showed US inflation reached a four-decade high in February, though remarks from President Putin have boosted sentiment.
Oil prices have also levelled off, with WIT just above flat at US$106.22 a barrel and Brent just below flat at $109.23, continuing the retreat from their recent highs.
The prospect of a boost in supply has helped assuage some fears about a supply crunch.
President Biden is expected to announce Friday that the US will join major allies and the European Union in calling to revoke normal trade relations with Russia. European Union leaders have already said they are ready to move quickly with further sanctions.
1pm: Pearson tops leaderboard
Pearson PLC (LSE:PSON) shares are now up 20% after private equity group Apollo confirmed it is considering a potential offer.
Apollo said in a statement it is in the “preliminary stages of evaluating a possible cash offer” for the publishing and education company.
Rebounding Russia-focused miner Polymetal International PLC (LSE:POLY) is next on the leaderboard, up 12%.
Elsewhere, the FTSE has retreated from its Putin-related spike but is still up 93 points (1.3%) to 7192.
Apart from Mexican precious metals miner Fresnillo PLC (LSE:FRES), the main fallers are defensive and utilities, United Utilities Group PLC, Severn Trent Plc, National Grid PLC (LSE:NG.), SSE PLC (LSE:SSE), BAE Systems PLC (LSE:BA.) and Vodafone PLC.
11.40am: Putin talks
Shares have leapt higher on optimistic reports from Russia, with the FTSE 100 jumping over 80 in a matter of seconds.
Russian news agency InterFax reported that President Putin said that "there are certain positive developments in the negotiations on Ukraine", or "positive shifts" in other translations.
The Footise is up 129 points (1.8%) on the day at 7,228.09 and indices in Europe have jumped even higher, with the Dax and CAC up more than 3%, and US futures also shooting higher.
The full quote from state-run Interfax from Putin was from a meeting with Belarusian President Alexander Lukashenko.
"No doubt, I will brief you on the situation on the Ukraine track, first and foremost, the current progress of negotiations that are conducted on a practically daily basis. As our negotiators have told me, some positive changes have been achieved there," Putin reportedly said.
10.22am: European stocks bounce
It's not just London's blue chips on the rise, Europe's battered bourses are also continuing their unsteady rally, with Germany the best performer.
The FTSE 100 is up 74 points (1.04%) at 7,172.89, while the Dax is up 1.3% and the wider Europen Stoxx 600 up 0.9%
This comes against the backdrop of day-two of the summit of EU leaders, who are discussing "bolstering our defence capabilities; reducing our energy dependency, in particular on Russian gas, oil and coal; and building a more robust economic base".
Market analyst Marshall Gittler at BDSwiss said: "There are two important results that we are looking for from this meeting: a plan to reduce dependence on Russian oil and gas; and a plan for an enormous issue of joint EU-wide bonds to fund energy and defence spending."
After discussing Ukraine’s application to join the EU, the leaders yesterday issued a joint statement saying they would support Ukraine “in pursuing its European path,” but are split in how long they think that path should be, with some eastern European countries calling for the bloc to give Ukraine’s application special consideration, but others further west responding that “there is no such thing as fast-tracking accession” (Dutch PM Mark Rutte).
It was reported that the communique following the meeting would say that “Ukraine belongs to our European family,” which is a nice way of avoiding the issue.
Also, European Commission President von der Leyen outlined her plans to the group to propose measures to phase out Europe’s dependence on Russian fossil fuels by 2027.
"However," noted Gittler, "there also seems to be a split there too, again with the Eastern European countries all in favor of further distance from Russia and the Western European countries that depend on Russian energy imports saying not so fast.
"We await the press conference at the end of the meeting to hear what they have to say about these issues."
Meanwhile, the FTSE 100 is up
9.50am: So far so good
It is so far, so good for the Footsie, which has built on its bright start to the day.
Pearson PLC (LSE:PSON), up 7.0% at 695.2p, has taken over from Ocado as the best performing blue-chip, helping propel the FTSE 100 69 points (1.0%) higher to 7,168.
The fall-out from Russia’s invasion of Ukraine continues to occupy the minds of investors. This morning it was announced that all of the non-executive directors (NEDs) of Evraz PLC (LSE:EVR), the Russian steel maker, have resigned with immediate effect.
Evraz has quite a lot of NEDS: Alexander Abramov, Alexander Frolov, Alexander Izosimov, Deborah Gudgeon, Eugene Shvidler, Eugene Tenenbaum, Karl Gruber, Maria Gordon, Sir Michael Peat and Stephen Odell - have resigned as directors with immediate effect. Alexey Ivanov, the company’s chief executive officer, will continue as a director, presumably to turn off the board room’s lights.
READ: Roman Abramovich sanctions, what it means for the Chelsea FC owner's assets
Trading in the shares of Evraz is currently suspended following the financial sanctions notice issued by the Office of Financial Sanctions Implementation.
BREAKING: PM Justin Trudeau says Canada is also sanctioning Roman Abramovich.
Evraz North America has operations in Canada and is a wholly owned subsidiary of London-based Evraz PLC (LSE:EVR), which is about 28 per cent owned by Abramovich.
More here: https://t.co/8SEnBSnkKE pic.twitter.com/1qpJ3YA34h
— Marieke Walsh (@MariekeWalsh) March 11, 2022
Elsewhere, housebuilder Berkeley Group Holdings PLC (LSE:BKG) advanced 0.6% to 3,748p after a decent trading update, where it reiterated sales and earnings forecasts for the year but noted the trading environment is getting tougher.
“All looks under control at Berkeley for now. The group’s cash position, projected to be some £900mln by financial year-end and newly renegotiated bank facilities leave Berkeley in a comfortable position. With the group selling many of its properties to overseas investors, that may be just as well, given the scope for surprises in the world currently,” observed Steve Clayton, a fund manager at Hargreaves Lansdown.
“Berkeley say that the environment is volatile, with the inflationary pressures currently being felt perhaps the greatest of these. For now, selling prices are going up faster than Berkeley’s budgeted predictions, so all is working out in the wash but the group will be well aware that if home prices stutter whilst costs keep surging, the current ‘Goldilocks’ scenario could come to an abrupt end,” he added.
8.30am: Ocado leads the way after patent victory
Helped by better than expected gross domestic product data, the Footsie has got off to a better than expected start.
London’s index of leading shares was up 62 points (0.9%) at 7,162, with Ocado Group PLC (LSE:OCDO), up 5.0% at 1,241p, leading the advance after what the company described as a “conclusive victory” over AutoStore in a patent dispute.
All of the 33 claims that originally constituted AutoStore's complaint to the International Trade Commission have now been rejected for a second time, or abandoned by AutoStore, Ocado noted.
Ocado continues actively to pursue its claims against AutoStore for infringement of Ocado's IP rights in both the United States and Europe, including its antitrust "Walker Process" claim against AutoStore in East Virginia and its infringement of five Ocado patents in New Hampshire.
Cybersecurity firm Avast PLC (LSE:AVST) has joined the list of FTSE 100 companies that has suspended operations in Russia.
The company has withdrawn the availability of all its products from Russia and Belarus and suspended all marketing and sales operations in these countries.
There was little share price reaction – the shares edged a penny higher to 641.6p – probably because the company is set to be taken over by NortonLifeLock Inc soon.
Stronger-than-expected 0.8% rise in UK #GDP in January may be old news (pre-#Ukraine) but it is still good news, and early business surveys (e.g. PMIs) suggest February was strong too.
FWIW, I'm sticking with my 2022 growth forecast of 5½% (most now expect 3-4%)... (1/2)
— Julian Jessop ???????? ???????? (@julianHjessop) March 11, 2022
As for the GDP data, ING Economics believes it is increasingly clear the UK economy is unlikely to see much (if any) lasting damage from the Omicron variant of Covid-19.
“A glance at the latest UK GDP figures shows very little lasting damage from Omicron at the headline level. January GDP rose by 0.8% on the month, having declined by ‘only’ 0.2% in December. That means that activity levels are back slightly above pre-virus levels,” reported James Smith, the economist who covers developed markets at ING.
“Admittedly there is a bit more divergence when you dig a little deeper. Consumer services industries including hospitality and entertainment/recreation were still quite some way below pre-Omicron levels in January; however, much of this will be made up in February, given we know from Bank of England debit/credit card data that ‘social spending’ has been back to comparable 2020 levels (before the virus hit) for a good few weeks now.
“Interestingly, we saw strong gains in both manufacturing and construction in January, which hints both that staff illness rates had little bearing on activity, but also that some of the supply constraints plaguing both industries may have begun to ease.
“Of course, these kinds of monthly growth rates are unlikely to last too much longer. The extreme volatility in wholesale energy prices means it’s hard to predict exactly where inflation will land this year, but on current futures prices it’s hard to see headline CPI dipping below 6% this year. That means consumer spending will struggle to avoid a downturn later this year,” he added.
Martin Beck, the chief economic advisor to the EY ITEM Club, suggested as headwinds from the pandemic fade, they are being replaced by significant factors affecting real incomes, including rising energy and other commodity prices.
“Commodity prices are up and CPI inflation now looks like peaking at around 9% in April. As things stand, following April's forthcoming 54% increase in Ofgem's price cap, October will deliver another significant rise in energy bills, slowing any fall-back in inflation. The rising cost of living will weigh on households' spending power, while a more uncertain environment is not positive for business investment.
“That said, the energy price cap will at least protect households from the most recent increases in gas prices until the autumn and activity retains still-powerful supports in the form of low unemployment and strong household and corporate balance sheets. Nonetheless, GDP growth this year and next now looks like being more muted than hoped only a few weeks ago but geopolitical uncertainty and what, if any, fiscal support will be announced by the Chancellor in the Spring Statement on 23 March mean that economic predictions at present are particularly uncertain,” he added.
7.40am: Firmer start expected after pleasant surprise in UK GDP data
UK gross domestic product (GDP) rose by 0.8% in January after falling 0.2% in December.
The market had been expecting a rise of around 0.2%.
All sectors of the economy grew in January 2022, with services up 0.8%, production up 0.7% and construction up by 1.1%, the Office for National Statistics (ONS) said.
Output in consumer-facing services grew by 1.7% in the month, mainly driven by a 6.8% increase in food and beverage activities, while all other services also saw growth on the month, by 0.6%.
The Services sector is now 1.3% above its pre-coronavirus (COVID-19) pandemic level, while construction is 1.4% above and production is 2.0% below. Within services, consumer-facing services are now 6.8% below their pre-coronavirus levels, while all other services are 3.4% above, the ONS added.
Following the data release, the FTSE 100 is now expected to open at around 7,124, up 25 points.
6.30am: FTSE 100 set for modestly firmer start ahead of GDP data
London listed blue-chip equities are expected to make modest headway at the outset, although the release of gross domestic product data could change all that.
Spread betting quotes indicate the FTSE 100 will open a18 points higher at 7,117.
“When UK December monthly GDP numbers were released a few weeks ago, we saw that the UK economy slowed by -0.2%, mainly because of the implementation of Plan B restrictions just before Christmas.
“For Q4 the economy expanded by 1%, a better-than-expected number given the challenges facing the consumer as well as the wider economy,” said Michael Hewson at CMC Markets.
“Even without the various plan B restrictions in place there was always the prospect that economic activity would have slowed before Christmas as people became more cautious in order to ensure they didn’t catch Covid and have to spend Christmas isolating.
“Because of that we could see a January rebound in economic activity, a trend that does appear to be reflected in some of the recent economic data. Expectations are for a monthly expansion of 0.2%, driven by growth across all sectors of the economy,” he added.
US markets were weak yesterday and Asian markets this morning have been similarly so.
The Dow Jones index fell 112 points to 33,174 while the S&P 500 fell 18 points to 4,260 after consumer price data released yesterday showed the US inflation rate hitting a 40-year high of 7.9%.
In Japan this morning, the Nikkei 225 is off 511 points at 25,179 while in Hong Kong the Hang Seng is 319 points lower at 20,571.
Around the markets
- Sterling: US$1.3083, u/c
- 10-year gilt: 1.423%, down 0.67 basis points
- Gold: US$1.988.50 an ounce, down US$11.90
- Brent: US$109.53 a barrel, up 20 cents
- Bitcoin: US$38,723, down 1.47%
- Ethereum: US$2,568, down 1.39%