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ADVFN Morning London Market Report: Tuesday 22 February 2022

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London open: Stocks fall as Russia-Ukraine crisis escalates

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London stocks fell in early trade on Tuesday as the crisis between Russia and Ukraine escalated.

At 0850 GMT, the FTSE 100 was down 0.6% at 7,437.31, after Russian president Putin ordered troops into two breakaway states in eastern Ukraine run by Moscow-backed separatists.

The UK government was preparing to sign off on a package of “significant” sanctions against Russia as a result.

On home turf, figures released earlier by the Office for National Statistics showed the UK had its first monthly budget surplus since the start of the pandemic but rising inflation caused debt interest payments to surge.

Public sector accounts excluding public sector banks showed a surplus of £2.9bn in January. The surplus was less than the £3.5bn forecast by economists and the government’s fiscal watchdog.

The ONS said the figure represented £5.4bn less borrowing than a year earlier and an £8.6bn increase in tax receipts to £91.6bn. Government spending rose £0.5bn to £76.3bn as rising inflation caused debt interest payments to increase £4.5bn to £6.1bn.

Interest payments were higher than the £3.6bn predicted by the Office for Budget Responsibility, the government’s fiscal forecaster.

Bethany Beckett, a UK specialist at Capital Economics, said: “With inflation set to keep rising until April, higher debt interest costs are likely to mean borrowing keeps overshooting the OBR’s forecast in the coming months. We expect the combination of higher inflation and interest rates to keep pushing borrowing above the OBR’s forecast in the coming months.”

In equity markets, Hargreaves Lansdown slid after the investment platform reported a 20% decline in interim pre-tax profit and a smaller-than-expected increase in assets under management.

Coca-Cola HBC was also weaker even as the bottling company posted a rise in full-year profit and revenue.

Wood Group tumbled after the energy services provider said it expected to take a one-off $100m charge relating to its Aegis Poland contract as it estimated a bigger loss for the legacy Amec Foster Wheeler project.

HSBC lost ground despite saying that annual profit more than doubled as lower bad debts more than made up for reduced revenue. Pre-tax profit for the year to the end of December rose to $18.9bn from $8.8bn a year earlier as revenue dipped 2% to $49.6bn.

On the upside, Smith & Nephew jumped to the top of the FTSE 100 as it reported higher full-year profits and revenue and announced the appointment of a new chief executive.

Shell and BP gushed higher as oil prices rallied amid the threat of sanctions against Russia, with Brent crude futures topping $97.75 a barrel.

Victoria Scholar, head of investment at Interactive Investor, said: “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, oil prices could easily push beyond $100 towards $120 a barrel to fresh highs not seen since 2014. Not only are geopolitical tensions supporting the uptrend but the fundamentals of supercharged demand post Covid coupled by constrained supply from OPEC+ continue to support more bullish price action ahead.”

InterContinental Hotels was in the black after it said annual profits more than doubled on the back of a strong final quarter in the US and China as economies recovered from the Covid pandemic.

Chilean miner Antofagasta rose after it posted growth in full-year profit and revenue thanks to higher copper and molybdenum prices.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Smith & Nephew Plc +2.33% +27.50 1,206.50
2 Antofagasta Plc +2.29% +32.00 1,428.00
3 Bp Plc +1.78% +6.90 395.30
4 Intercontinental Hotels Group Plc +1.74% +85.00 4,973.00
5 Legal & General Group Plc +1.29% +3.50 275.20
6 Ashtead Group Plc +0.97% +45.00 4,673.00
7 Experian Plc +0.65% +18.00 2,805.00
8 Rolls-royce Holdings Plc +0.65% +0.74 115.46
9 Croda International Plc +0.63% +44.00 7,016.00
10 Ferguson Plc +0.54% +60.00 11,110.00

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Hargreaves Lansdown Plc -17.68% -229.50 1,068.50
2 Coca-cola Hbc Ag -5.62% -130.00 2,185.00
3 Severn Trent Plc -2.89% -82.00 2,753.00
4 United Utilities Group Plc -2.60% -27.50 1,030.50
5 Fresnillo Plc -2.53% -17.60 679.20
6 Evraz Plc -2.40% -6.40 260.60
7 St. James’s Place Plc -2.15% -32.50 1,476.00
8 Mondi Plc -1.86% -35.50 1,877.00
9 Scottish Mortgage Investment Trust Plc -1.71% -16.60 952.40
10 National Grid Plc -1.63% -17.60 1,061.80

 

US close: Major indices extend losses

Wall Street stocks ended the session lower on Friday, adding to losses recorded in the Dow Jones Industrial Average’s worst day of the year so far.

At the close, Dow Jones Industrial Average was down 0.68% at 34,079.18, while the S&P 500 was 0.72% softer at 4,348.87 and the Nasdaq Composite saw out the session 1.23% weaker at 13,548.07.

The Dow closed 232.85 points lower on Friday, extending losses recorded in the previous session as market participants monitored developments in the Russia-Ukraine conflict and digested a disappointing initial jobless claims report.

As for Friday, investors were still firmly focussed on Russia and Ukraine at the opening bell after the latter accused pro-Russian separatists of attacking a village near the border and US Secretary of State Antony Blinken told the United Nations that the situation was now at a “moment of peril”.

Blinken has also accepted an invitation from Russian foreign minister Sergey Lavrov to meet next week, provided there is no further Russian incursions into Ukraine.

On the macro front, sales of US existing homes unexpectedly rose in January, while housing inventory was at a record low, according to data released on Friday by the National Association of Realtors. Sales were up 6.7% from December to a seasonally-adjusted annual rate of 6.5m. Analysts had been expecting sales to fall 1% to 6.1m. Compared with a year earlier, sales were down 2.3%.

On another note, the Conference Board‘s leading index decreased 0.3% in January to 119.6 following a 0.7% uptick in December.

In the corporate space, Deere & Co upped its full-year profit guidance on Friday amid improved margins as a result of price hikes and strong demand for its tractors and combines.

 

Tuesday newspaper round-up: GFG Alliance, supermarkets, gas markets

Sanjeev Gupta’s GFG Alliance metals empire has launched an action in London’s high court in a last-ditch attempt to reclaim a prized aluminium smelter in northern France from a US private equity fund. Two GFG Alliance companies have filed a legal claim against a fund controlled by American Industrial Partners (AIP), which has run the smelter in Dunkerque since October after gaining approval from the French government. – Guardian

Hundreds of thousands of tonnes of surplus food that could be going to hungry families is going to waste as supermarkets restrict who their suppliers can give it to, according to food distribution charities. Several independent charities, which are grouped together under the Xcess network, say they struggle to source unwanted edible food from manufacturers and processors because of supermarkets’ rules about the handling of their own-label products. – Guardian

Tens of billions of pounds in investment is to be unleashed by City insurers after ministers pledged to axe controversial EU-era red tape in a major post-Brexit shakeup. Two years after the UK officially left the EU, John Glen, the City minister, said the Government will ditch swathes of the controversial Solvency 2 rulebook governing insurers. – Telegraph

An influx of hedge funds and other financial traders into European gas markets has contributed to high and volatile prices over the past year, according to Shell. Prices are becoming less determined by news about gas supply and demand because of the influence of new financial players moving money in and out of the market, the energy group warned. – The Times

A self-styled “fintech” payments business was authorised by the City regulator while its founder was subject to a money laundering investigation related to the notorious multibillion-pound OneCoin scam. Viola Money (Europe), which once advertised itself as a rival to Monzo, the challenger bank, was placed into insolvency proceedings in December after the Financial Conduct Authority expressed “serious concerns” about its operations. – The Times

 

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