- FTSE 100 closes 41 points higher
- Polymetal back on top
- UK fuel hits another record
4:55pm: FTSE 100 closes 41 points higher
The FTSE rebounded on Monday, a sign that investors are becoming more comfortable with the financial risks of Russia's invasion of Ukraine.
The UK's blue chip index finised the day at 7,196 points, a 41-point gain or 0.6%.
“The initial fighting in Ukraine prompted an outbreak of risk aversion in markets, but for now the situation seems to have settled down, at least for markets," IG's Chris Beauchamp said.
However, Beauchamp is predicting the bullish sentiment will continue.
"Western intervention still looks highly unlikely, and for now negotiations continue. What is harder to tell is whether the coming months will see a real slowdown in growth. For now it looks like bullish sentiment will revive, but there are still plenty of unknowns to deal with.”
4:00pm: FTSE 100 lifted by tentative Ukraine optimism
The Footsie gained 47 points, or 0.66%, with early market sentiment that peace talks between Russia and Ukraine are progressing well having remained throughout the day.
That sentiment was echoed in the US markets, with all the indices minus the Nasdaq up.
3.40pm: North Sea investment a possibility, say Downing Street
According to a Downing Street spokesperson, Prime Minister Boris Johnson and the bosses of offshore oil and gas companies are said to have discussed the possibility of increasing investment in the North Sea.
The move would help ease the reliance on imported gas and boost the supply of domestic gas.
“The Prime Minister and CEOs discussed increasing investment in the North Sea oil and gas industry and boosting supply of domestic gas,” the spokesperson said.
“This included how the UK can remove barriers facing investors and developers, and help projects come online more quickly”.
3.30pm: Russia turns to yuan
Russia’s finance minister Anton Siluanov has said the country may lean on its reserves of Chinese yuan to pay Wednesday’s interest payment on its debts in an attempt to avoid a default.
According to Reuters, Siluanov said this would mean Moscow has met its obligations to avoid defaulting on the debt.
The country cannot pay from its reserves of US dollars, euros, sterling and yen following sanctions on its central bank.
It is believed Russia is blocked from accessing around US$320bn in foreign exchange reserves, most of which are held in overseas financial centers, although it still has access to its gold and yuan reserves.
Earlier today, it was reported by the Guardian that Russia may use its own currency, the rouble, to pay the interest on its debt, although that move would have likely resulted in a default given the currency has tanked, with US$1 equalling 120.50 roubles.
Moscow is due to pay US$117mln interest payments on two dollar-denominated bonds.
2.54pm: Polymetal regains top spot
Polymetal International PLC (LSE:POLY) regained its place as the biggest riser on the Footsie, up 6.81%, as the index gained 57 points.
FTSE Russell, a subsidiary of the London Stock Exchange, had announced earlier it would be booting four Russian-linked stocks from the 100 and 250 lists, with Polymetal and Evraz PLC (LSE:EVR) facing the chop in this Friday's review.
That caused the Anglo-Russian mining company to fall towards the bottom of today's fallers and risers on the blue-chip index, but has since rallied to regain top spot.
2.30pm: US markets open higher as expected
As expected, the US markets opened higher as investors across the pond react to comments made by both Ukrainian and Russian ministers that peace talks are progressing well.
The Dow Jones Industrial Average opened 304 points or 0.93% higher, while the S&P 500 gained 26 points, a 0.62% climb.
The Nasdaq index climbed by 41 points or 0.32%.
2.20pm: Commodities being hit by war
Russia’s invasion of Ukraine and the subsequent sanctions imposed on Moscow have caused “serious dislocations” of commodities, and the longer the Fed and governments take to try and control the issue, the worse the problem will get, according to George Lagarias, chief economist at Mazars.
"The result in failing to predict Russia’s invasion has been further upheaval in the equities market, where volatility (if extrapolated to year-end) would reach that of the Euro Crisis. At the heart of this crisis is not the financial system like 2008. Instead, it’s the global commodities markets. Errant commodity prices exacerbate inflation and put pressure on all asset classes.”
"Sanctions on Russia are taking an enormous toll on western markets. Volatility for stocks and bonds is one thing. But commodities markets are experiencing serious dislocations. As a result, global markets are trendless and in desperate search of a paradigm- and leadership.”
“The Fed, the world’s de facto central bank and the organisation everyone is looking to, may now persist that inflation is its primary mandate, but it surely knows it can do precious little to stop prices rising due to shortages. The nature of this crisis is so unique, that it may even have to consider new tools, like Quantitative Easing was in 2008.”
"The simultaneous fall of stocks and bonds coupled with crippling volatility in the alternatives space confirms that we are living through another systemic event. The quicker investors and policymakers realise that, the more contained the consequences.”
“But every day that passes when the Fed is focused on inflation it can’t contain and developed market governments worry about debt and fiscal outlays, is a day when a systemic problem is getting worse. That day will eventually cost billions of freshly printed money and prolong any sort of return to market normality.”
“Investors should be on the lookout for policy announcements soon, lest the Great Commodity Crisis seriously threatens both investment portfolios and cash."
2.00pm: UK fuel hits another record
UK fuel prices hit another record over the weekend as a surge in crude oil pushed prices higher.
Diesel hit 173.4p per litre, up 22p from the previous month, while petrol reached 163.5p per litre.
Crude oil retreated today by 5.99% to US$102.78 a barrel, with hopes that will soon translate to a fall in prices at the pumps.
RAC fuel spokesman Simon Williams said, “The price hikes seen over the weekend are still a result of the oil price rise which began at the start of the month and peaked early last week.
“As the oil price has now fallen back, we should hopefully reach the peak and start to see prices going the other way to reflect the big drop in wholesale costs seen at the end of last week, subject to no further spikes in the barrel price this week.”
1.30pm: Scottish Mortgage down, Nasdaq set to open higher
The tech-heavy Scottish Mortgage Investment Trust PLC (LSE:SMT) was down 2.23%, with the Nasdaq expected to open higher after adding 0.45% in pre-market trading.
Meituan, which is the sixth-largest holding in the trust at 3%, and Nio, which is at number 11 and comprises 2.3% of its portfolio, both experienced double-digit losses as the Chinese markets tanked following a rise in Covid cases.
Hong Kong's Hang-Seng index was hit most, falling 4.97%, while the Shanghai Stock Exchange fell 2.60%.
12.55pm: Housebuilders lead the way
Housebuilder Persimmon PLC (LSE:PSN) leads the way as today’s biggest climber on London’s blue-chip index, up 5.85%.
Taylor Wimpey PLC (LSE:TW.) also makes up the top five, up 3.65%, with housebuilders seemingly boosted by a news story over the weekend surrounding the cladding on buildings, according to Liberum.
Sources close to a PwC study suggest the bill to remedy unsafe cladding on buildings between 11 and 18 metres is expected to be less than £1bn, significantly lower than previous government claims of £4bn.
The story also cites that the cost of footing the bill will not solely fall at the feet of developers, but a wide range of companies alongside government contributions.
12.35pm: US preview with stocks expected to open higher
US stocks are expected to open higher as Russia and Ukraine resume virtual talks aimed at ending the conflict that has continued to escalate.
Futures for the Dow Jones Industrial Average rose 0.28% in Monday pre-market trading, while those for the broader S&P 500 index gained 0.78% and the tech-heavy Nasdaq added 0.45%.
The diplomatic efforts to end the war follow an escalation in the conflict over the week as Russia attacked a Ukraine base close the country's border with Poland, killing 35 people and wounding 134, according to a Ukrainian official. Russia is also reported to have asked China to provide it with military equipment.
“Stock index futures rose as trading got underway on Monday, while gold and crude oil slipped, as once again, there was hope that the Ukraine conflict could end after officials from both sides gave their most upbeat assessments yet on Sunday about the progress in peace talks,” commented Fawad Razaqzada, market analyst at ThinkMarkets. "Apparently, there could be positive results within days."
Stocks closed with losses on Friday after the markets declined in the final hour of the trading session as investors remained cautious due to the ongoing Russia-Ukraine war.
The Dow lost 0.69% to 32,944, while the Nasdaq plunged 2.18% to 12,844 and the S&P 500 shed 1.3% to 4,204.
“You can understand why the markets have reacted positively to the headlines given the fact that developments in Ukraine have been the primary driver of risk appetite," Razaqzada added. "But so far, every bit of optimism has led to pessimism and disappointment, with Russian forces continuing their military operations regardless. Will this prove to be another such scenario?"
Also this week, the US Federal Reserve is expected to hike interest rates by 25 basis points when the Federal Open Market Committee wraps up its two-day meeting on Wednesday.
“Will the Fed surprise the market with a 50 basis point hike? I doubt it,” Razaqzada said.
“Although inflation has continued to soar, a 25 basis point hike is a good way, the Fed would feel, to get the hiking cycle started without scaring the markets.”
12.15pm: Evraz and Polymetal set for the boot
Index provider FTSE Russell said it would be deleting four UK-listed Russian-focused companies from its indices after brokers refused to sell their shares.
Included on the list are FTSE 100 companies Roman Abramovich’s Evraz PLC (LSE:EVR) and today’s top riser Polymetal International PLC (LSE:POLY), as well as FTSE 250 companies Petropavlovsk and Raven Property Group.
Evraz and Polymetal International were due to drop out of the FTSE 100 into the FTSE 250 in the March review this Friday, but instead will be replaced by NB Private Equity Partners and Standard Life Private Equity Trust, with the move taking effect from next Monday.
The London Stock Exchange's subsidiary said, "that the ability to buy or sell shares of the index constituents below is severely restricted due to major international brokerage firms no longer supporting trading of these securities and therefore there is insufficient institutional liquidity and market depth.”
11.50am: Russia expects business to return
The Footsie has retreated from some of its early morning gains and is now only two points, or 0.0034%, ahead of Friday's close.
Russian authorities seem confident that businesses that have suspended operations in the country, including Shell and McDonalds, will return at some point, at least according to the economic development minister Maxim Reshetnikov.
"It depends on the foreign retail chains themselves," Reshetnikov told reporters.
"It is their decision to what extent and how to continue their activities here. At the moment, we are well aware that there are such decisions, but these decisions are associated with the suspension of activities, and a significant proportion of these decisions are due to problems with logistics, among other things. Foreign companies are facing the same problems as Russian business," he said, commenting on the withdrawal of foreign stores and retail chains from Russia.
"And when a week ago we had a meeting with foreign business that operates in Russia, the first question they raised was related to logistics, to the need to reconfigure production chains, to find suppliers in Asian countries and replace European suppliers with Asian ones," the minister said.
"At the moment, those decisions that have been made, they concern the suspension of activities, teams are being preserved, wages are being paid in accordance with existing labor laws," Reshetnikov said.
"Therefore, we assume that a significant part of business, reconfiguring these chains, will return to operations in Russia, because our market has not gone anywhere, companies have generated earnings here for a long time, they have had a profitable business in our country, and this gives us reason to hope that the situation will return to normal," Reshetnikov said.
11.20am: China's rising Covid cases
China has put 17.5mln people in the city of Shenzhen, its tech manufacturing hub, into lockdown following a rise in Covid infections, with the country reporting its largest climb in daily cases in nearly two years.
That news has seen the Chinese currency hit a 1-month low, with one yuan equalling US$0.16.
It is perhaps no surprise that the tech-heavy Hang Seng Index plunged 11% as stocks such as Meituan, Xpeng and Nio slumped by double digits, given Shenzhen is the tech centre of China.
The Shanghai Stock Exchange also lost 2.6%, with the neighbouring Hong Kong’s Hang Seng index down nearly 5%,
According to Victoria Scholar, head of investment at interactive investor, a combination of rising covid cases and “slowing economic growth” could see the Eastern powerhouse cut interest rates as early as tomorrow.
If they were to do so, that would go “against the grain for global monetary tightening amid the backdrop of surging commodity prices and broader inflation.”
Another issue China has had to deal with is how invested it gets with Russia over its invasion of Ukraine.
So far, President Xi Jinping has failed to outright condemn the attacks but also hasn’t provided any financial and military support to Moscow.
It may be forced to make a decision either way in the coming days should peace talks between Russia and Ukraine reach a standstill, with reports Vladimir Putin is asking for military and financial aid, while the US has warned Beijing that it will be next to face sanctions should they intervene.
10.50am: Oil dragging the Footsie
With Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.) dragging on the FTSE, some analysts are noting that despite reports of "substantial progress" in peace talks, the conflict in Ukraine seems to be escalating.
The FTSE has come off its earlier best levels, up 21 points (0.3%) to 7177.
Traders don't need much more than any good headline to grab hold of, said market analyst Neil Wilson at Markets.com.
"Russia is asking China for military aid and says Western shipments of weapons are legitimate targets. Russia says it can make debt repayments in rubles...default imminent, possibly on Wednesday."
Amid further lockdowns in China, which are looking like hitting Apple among others, Wilson added: "For now, market positioning is still very pessimistic, with the Vix holding above 30 though the term structure is looking healthier than it was a week ago. The rip for equities on Friday on those comments indicate how short the market is right now."
With the FTSE down 3% in the year to date versus the DAX’s 14% decline this year, he noted the German index had was leading the way in Europe.
The DAX was "massively oversold, so conditions for further short squeeze are there, though I would caution that any jump is a bear market rally. I feel like we are in a sell strength kind of mode."
10am: More confidence
London's blue chips shares are showing more confidence now, with the Footsie making a stronger go of it, up 52 points (0.7%) to 7208.
It is trailing behind other bourses across the Channel, which have more ground to recover, with Germany's DAX up 3%, while Milan and Paris indices are both up 2%.
On the hopes that both sides of the Ukraine war gave their most upbeat assessments over potential peace talks, market analyst Fawad Razaqzada at ThinkMarkets said: "Apparently, there could be positive results within days. You can understand why the markets have reacted positively to the headlines given the fact that developments in the Ukraine have been the primary driver of risk appetite.
"But so far, every bit of optimism has led to pessimism and disappointment, with Russian forces continuing their military operations regardless. Will this prove to be another such scenario?
"If last week was anything to go by, I wouldn’t hold my breath."
Topping the FTSE leaderboard now is Russia-focused miner Polymetal International PLC (LSE:POLY), up another 15.6% thanks to bargain hunters.
9.15am: Manufacturers' inflation warning
Prices are being hiked at the highest rate on record, according to a report from the manufacturing sector that is the latest sign that rising coats are feeding through to balance sheets.
The survey by trade body Make UK and accountants BDO showed 58% of manufacturers had increased prices at the beginning of 2022, against 51% in the same period last year and the highest figure since the survey began in 2000.
The survey, polling 287 companies, took place between 1 February and 21 February, and does not yet take account of the commodities crisis following Russia’s invasion of Ukraine.
"Companies are now facing eye-watering increases in costs which are becoming a matter of survival for many," said Make UK chief executive Stephen Phipson.
"While some of the increases are driven globally, the government cannot use this as a shield from the fact some are self-imposed and, added together, are now forming a perfect storm for companies."
8.21am: Slow creep higher
The FTSE 100 crept higher in early trade on Monday, continued where it left off last week and in contrast to falls seen on Asian markets.
London's blue-chip index had added seven points in early trading to 7162.
Oil prices retreating from their highs means the index is being held back by oil giants Shell PLC (LSE:SHEL, NYSE:SHEL) and BP PLC (LSE:BP.), down 1% and 2.6% respectively.
Brent crude futures are down 3.2% to US$109.04 and WTI 3.4% to US$105.60.
Markets are reacting to positive comments around the Russia-Ukraine war, with Ukrainian negotiator and presidential adviser Mykhailo Podolyak tweeting that, "Russia is already beginning to talk constructively... ... I think that we will achieve some results literally in a matter of days".
A Russian delegate echoed the sentiment and US Deputy Secretary of State Wendy Sherman also highlighted that Russia was showing signs of interest to engage in talks.
Top of the FTSE leaderboard is British Airways owner International Consolidated Airlines Group, a perennial source of market optimism on all things pandemic and Ukraine-related of late.
Next in the list are aerospace supplier Melrose Industries, housebuilder Persimmon PLC (LSE:PSN), broadcaster ITV PLC and Lloyds Banking Group PLC.
“With more questions than answers currently available, any short-term market rallies are currently lacking conviction," said market analyst Richard Hunter at Interactive Investor.
6.39am: Modest start predicted
The FTSE 100 is expected to open modestly higher amid hopes the Russia-Ukraine conflict could be headed towards a ceasefire and possible end.
Comments from both sides after the latest round of diplomatic talks were suggestive of a thawing of relations.
Indeed, Ukraine’s president, Volodymyr Zelensky, has indicated he would meet Vladimir Putin for peace talks.
The mood was tempered by a report in the Financial Times that Russia had approached China for military equipment. Beijing has thus far failed to condemn Russia for its invasion of Ukraine.
Michael Hewson, of CMC Markets, did not share the optimism of some of his fellow commentators.
“The sad reality is that any ceasefire remains some way off, with Russia’s behaviour over the weekend pointing to increasingly desperate measures to crush Ukrainian morale by a campaign of indiscriminate bombing, as they widened their target area to parts of western Ukraine.
“There is also a concern that any new Russian measures might include the use of biological and, or chemical weapons.”
Asia’s main stock markets were mixed with Japan and Australia higher, and China and Korea headed lower.
Looking ahead, the Federal Open Market Committee meets on Tuesday and Wednesday and chairman Jerome Powell has already said he will be recommending a 0.25% hike in rates, the first since December 2018.
On the corporate front, we have updates from Ocado, Deliveroo, Cineworld and Wetherspoons on what is shaping up as a fairly busy week for corporate news.
Around the markets
- Pound US$1.3020 (-0.13%)
- Bitcoin US$38,631.60 (2.22%)
- Gold US$1,977.70 (-0.37%)
- Brent crude US$109.87 (-2.96%)
6.50am: Early Markets - Asia / Australia
Asian stocks were mostly lower on Monday as China is facing its worst COVID-19 outbreak since the country clamped down on the pandemic in 2020.
Shenzhen, the biggest city in the manufacturing hub of Guangdong province, told all non-essential businesses to suspend production or have employees work from home for a week starting Monday.
The Shanghai Composite in China slumped 2.57% and Hong Kong’s Hang Seng index plunged 4.7%.
Japan’s Nikkei 225 rose 0.58% while South Korea’s Kospi fell 0.59%.
Australia’s S&P/ASX200 ended the day 1.21% higher, led by gains for banks.