- FTSE 100 closes down 10 points
- Wall Street weaker early on
- Oil prices unsettled by Shanghai lockdown
4.50pm: Fall back by Footsie
The FTSE 100 index ended weaker on Monday, sinking back from earlier gains late on in tandem with falls on Wall Street as uncertainty over Russia/Ukraine peace talks remain, though oil prices eased after a COVID-19 lockdown in Shanghai.
At the close, the UK blue-chip index was 10.21 points or 0.14% lower at 7,473.14 well below the session high of 7,539.30.
AJ Bell investment director Russ Mould commented: “The two-day restrictions imposed in Shanghai are evidence that the pandemic is not yet over and inevitably, given the implications for global growth, have put oil prices under pressure. It was no surprise to see Asian stocks slump on the move as the region’s dominant economy is once again threatened by the sceptre of Covid-19."
Noting the renewed peace talks between Russia and Ukraine, Mould added: “A return to the status quo which existed before the invasion seems impossible though and the implications of the conflict are almost certain to be lasting whenever it comes to an end.
“President Biden brought about as much calm to the situation as Will Smith at the Oscars as unscripted remarks hinted at regime change in Moscow over the weekend. While these comments have been hastily walked back by officials acutely aware that the ad lib is helpful to Russia, in a sense the damage has already been done."
3.50pm: Yield curve signals
Yield curves, which plot interest rates (yields) of bonds with equal credit quality against varying maturity dates, can be used to predict when a recession is on the horizon.
Historically, recessions started ahead of the curve inverting but that is now not the case.
“From the point of curve inversion to the actual peak of the equity market, which typically takes place around a year later, S&P500 was higher by 15%,” Mislav Matejka, JP Morgan head of global and European equity strategy, said.
This time around, with experts predicting an upcoming recession, the clock is yet to start ticking and the upcoming quantitative tightening may delay proceedings, Matejka commented.
“Our FI team does not anticipate the outright inversion happening this year. Not all the yield curve signals are moving closer and closer to the recession trade,” he added.
Falling 10 year-3-month yield spreads, which is typically a good recession indicator, has been strongly steepening in recent months – highlighting that many conventional signs are no longer always accurate.
“We still believe that recession should not be seen as a base case, even in Europe,” Matejka said.
A flat or inverted yield curve has been a good cycle signal as it normally showed that financing conditions became very restrictive, but again this is not currently the case.
Yield curve explainer: What it is and what they mean about the economy
3.01pm: US stocks mixed on open
Here’s a look at the American indexes soon after open…
The Dow Jones Industrial Average nosedived, the S&P 500 remained stagnant and to analysts’ surprise, the Nasdaq advanced much higher.
The Dow plunged 139 points, or 0.4%, lower but the tech-heavy Nasdaq surged 88 points, or 0.6%, higher.
Meanwhile, The S&P 500 rose 1 point – by far the closest to experts’ predictions of relatively flat opens.
Now, a look at indexes around the world…
In the UK, the FTSE 100 stayed positive, up 14 points, while the FTSE 250 rocketed 139 points on Monday afternoon.
The German index Dax led the European indexes having soared 239 points, while the French Cac 40 climbed 96 points.
2.22pm: FTSE 100 stays positive
The London blue-chip index has remained in the green for the entirety of Monday so far, with two hours to go until market close.
Here’s a look at the biggest FTSE 100 movers…
Aviva PLC (LSE:AV.) led the risers having gained 3.0%, followed closely behind by Burberry Group PLC (LSE:BRBY) and British Airways owner International Airlines Consolidated Group SA, which rose 2.8% and 2.4% respectively.
Rolls Royce Holdings PLC has stayed at the top of the movers all day, having sunk 10% on speculation of a potential takeover from an unidentified party.
Meanwhile, Bae Systems PLC and Antofagasta slipped 3.2% and 2.7% respectively.
1.41pm: Oil giants slump on falling prices
The FTSE continues to make steady progress, despite the heavily weighted oil giants declining in line with the weaker oil price.
London’s index of leading shares was up 53 points (0.7%) at 7,536.
“Oil prices continue to see-saw as lockdowns in China affecting perceived near-term demand counter enduring supply risks emanating from Russia’s war in Ukraine,” reported SP Angel.
The price of Brent crude is down US$5.38 (4.6%) at US$111.95 a barrel.
“Having rallied to US$120 a barrel on Friday in the first weekly gain in three, Brent crude and WTI [West Texas intermediate] are reversing course as China’s latest lockdown measures prompt concerns about slowing oil demand. Both benchmarks are trading lower by more than 3% as the market tries to weigh up the economic fallout from Shanghai’s lockdown against the supply constraints from the war between Russia and Ukraine. No doubt OPEC+ which prepares to gather on Thursday will be paying close attention to China’s COVID situation, with further lockdowns potentially used to support the cartel’s slow and steady mentality towards releasing supply to the market, despite calls for an accelerated output release trajectory,” said Victoria Scholar, the head of investment at interactive investor.
Shares in BP PLC (LSE:BP.) were down 1.5% at 385.85p while Shell PLC (LSE:SHEL, NYSE:SHEL) was off 0.5% at 1,238.5p.
China has begun its most extensive lockdown in two years to conduct mass testing and control a growing outbreak in Shanghai. The citywide lockdown will be China’s biggest since the 76-day lockdown of Wuhan in early 2020. https://t.co/jhpHWMZF9t
— The Associated Press (@AP) March 28, 2022
12.15pm: US stocks set for a dull start
US stocks are seen opening flat to lower on Monday as investors consider the possibility of quick interest rate rises in the US as a data-heavy week unfolds, in which worries over inflationary pressures are likely to solidify.
Meanwhile, Russia’s invasion of Ukraine has entered a second month and the developments on the war front continue to have repercussions for markets. News headlines from the region will continue to be in focus.
Futures for the Dow Jones Industrial Average and those for the S&P 500 were both little changed, while contracts for the tech-heavy Nasdaq-100 shed 0.2%.
“A busy week of economic releases will further inform the thinking of central banks, as they grapple with the twin issues of inflation and the speed of interest rate rises,” said Richard Hunter, Head of Markets at interactive investor.
“In the US, inflation numbers and the monthly non-farm payroll data are likely to underline the Federal Reserve’s current focus on the former, with the latter now implying an economy which is nearing full employment. Indeed, having digested the initial interest rate rise, some are now calling for a more aggressive approach from the Fed in tackling soaring inflation. The possibility is now growing for 0.5% hikes at both the May and June meetings,” he added.
Reflecting these concerns US Treasury yields rose quickly, suggesting that markets are expecting the Federal Reserve to raise rates rapidly. The spectre of rising prices and interest rates are, in turn, raising fears that US economic growth may falter.
“From the Fed’s perspective, this remains a difficult balancing act. The economy seems to be on a recovery trajectory, but the Treasury yield curve in the US is getting close to inversion. This implies concerns that there may be an overshoot on hiking rates, which could result in an unwanted Fed-induced recession,” said Hunter.
Oil prices are also expected to be in focus with a coronavirus (COVID-19) lockdown in Shanghai dampening prices. Benchmark Brent crude futures were down 1.9% at $113.16.
“Even so, this does not remove the stark reality of a general imbalance between
11.20am: FTSE consolidates early gains
London’s leading shares are in consolidation mode as investors await developments in Ukraine.
The FTSE 100 was up 33 points (0.5%) at 7,517, with Ukraine president Volodymyr Zelensky saying he hoped peace talks, scheduled to take place this week in Turkey, would bring an end to the fighting “without delay”.
Ukrainian President Volodymyr Zelensky says Ukrainian troops have found Russian ceremonial uniforms, which he says indicates that Russian forces were planning on throwing a victory parade in Kyiv. @arwaCNN has more. pic.twitter.com/1UJsrBXyV1
— CNN (@CNN) March 28, 2022
Zelenskyy said his country could declare neutrality and offer security guarantees to Russia to secure peace.
With the (possibly misplaced) perception that some of the steam is going out of the Russia-Ukraine conflict, investors are showing interest in stocks of companies operating in Russia.
Gold miner Petropavlovsk PLC (LSE:POG) is London’s top riser today, with a 47% rise at 2.2p, while Amur Minerals PLC, which has assets in the far east of Russia, is 17% better at 1.7p.
Russian Foreign Minister Lavrov: Any Meeting Between Putin And Zelenskiy To Exchange Views Now Would Be Counter-Productive
— LiveSquawk (@LiveSquawk) March 28, 2022
Meanwhile, the debt rating agency Standard & Poor has cut the growth outlook for the Eurozone, citing higher energy prices in the wake of Russia’s invasion of Ukraine.
10.25am: Footsie higher despite Rolls-Royce falling to earth
Behind Rolls Royce Holdings PLC, which has now sunk 11%, on the FTSE 100 fallers was Barclays PLC (LSE:BARC), which eased 3.7% lower on Monday morning – underperforming the 0.4% gain for the London index.
The bank said it expects to take a £450mln charge and has delayed its share buyback by at least three months after issuing more structured and exchange-traded notes than it had registered for sale.
The charge means that its £1bn buyback programme announced in February is now expected to start in the second quarter of this year.
The lender and regulators will inquire into the circumstances and make requests for further information, both said.
Read more: Barclays to take £450mln charge, delays buyback
9.38am: Rolls Royce and Ted Baker slide on takeover no-go
Shares in Rolls-Royce Holdings PLC (LSE:RR.) have plunged 11%, reversing some of Friday’s surge amid speculation of a takeover from an unidentified suitor.
"With nothing confirmed so far, the shares are losing steam this morning. However, they are still trading significantly above Thursday’s close, suggesting there is still some M&A premium in the price with investors pinning their hopes on an approach,” said market analyst Victoria Scholar at Interactive Investor.
There's more definite takeover news around Ted Baker PLC (LSE:TED) too, with the shares down 3% after the fashion brand said it had rejected two takeover proposals from US private equity firm Sycamore Partners.
Scholar said it is "unlikely that the deal will be accepted by Ted Baker’s board, raising the question of whether Sycamore will bring a sweetened offer to the table".
Sycamore, which specialises in retail, has also reportedly looked at high street chemist Boots.
8.59am: Oil Shanghaid
Oil prices have been knocked back from their latest surge by news that Shangai has gone into a partial lockdown, with the expectation that restrictions on the movement of its 26mln citiziens will reduce demand.
Having rallied last Friday on news of a drone attack on a Saudi storage facility, the price of a barrel of Brent Crude was down 3.4% to US$116.61 this morning.
On the Shanghai measures, market analyst Ipek Ozkardeskaya at SwissQuote said: "The new shutdown measures due to COVID are expected to be short-term road bumps on a long up-trending road, as the impact of the lockdowns on medium-term oil demand will certainly remain limited, whereas the tight supply concerns – which are amplified by the tensions in Saudi with the Houthi rebels should keep oil prices under a decent positive pressure."
But across Europe, shares are mostly higher as Ukraine appeared ready to make a number of concessions to call off the war.
8.28am: In the green
The FTSE 100 opened its weekly account in the green ahead of peace talks between Ukraine and Russia later Monday.
Ahead of those negotiations, President Volodymyr Zelensky told Russian journalists Ukraine is ready to declare neutrality and drop its bid to join NATO.
He also pledged to not develop nuclear weapons if Russia’s Vladimir Putin withdraws troops and Kyiv receives security guarantees.
In the Square Mile, the early price action was in the oil sector with BP and Shell both down around 2.5%.
After a sharp spike in the share price following rumours of bid interest and an engine order last week, shares in Rolls-Royce opened down 8.5% after taking a reality check.
6.55am: FTSE 100 set to make a positive start
The FTSE 100 looks set to shrug off the economic threat posed by a COVID shutdown in Shanghai amid hopes a ceasefire might be brokered in Ukraine.
On the eve of peace talks in Turkey, President Volodymyr Zelensky told Russian journalists Ukraine is ready to declare neutrality and drop its bid to join NATO.
He also pledged to not develop nuclear weapons if Russia’s Vladimir Putin withdraws troops and Kyiv receives security guarantees.
While the comments raised hopes that a temporary settlement could be brokered, certain commentators suspect Moscow is using the talks as cover to prepare for renewed attacks on Ukraine.
In a weekend of political drama, US officials have been forced to walk back strategically unhelpful comments by President Joe Biden effectively calling for regime change in Russia.
Away from the Ukraine war, Asia’s main markets were rattled by a two-day lockdown in Shanghai, China’s financial centre, amid rising COVID cases.
The news sent oil tumbling, while shares prices across the region were also hit by the tumbling yen, which was hit by Japan’s policymakers' insistence on keeping the country’s interest rates low.
Looking ahead, the week’s main market news will be provided by a slew of mid-caps including pop maker AG Barr, Sir Martin Sorrell’s marketing machine, S4 Capital, and water firm Pennon.
Around the markets
- Pound US$1.3136 (-0.35%)
- Bitcoin US$ 47,212.10 (0.4%)
- Gold US$ 1,945.10 (-0.75%)
- Brent crude US$ 116.34 (-3.75%)
6.50am: Early Markets - Asia / Australia
Asia Pacific markets were mixed on Monday as oil prices declined in the afternoon of Asia trading hours, with international benchmark Brent crude futures down 2.61% to US$117.50 per barrel.
Japan’s Nikkei 225 fell 0.64% and South Korea’s Kospi slipped 0.01%.
The Shanghai Composite in China declined 0.21% while Hong Kong’s Hang Seng index surged 0.94%.
Australia’s S&P/ finished slightly higher (+0.08%) led by widespread gains in the resources sector.