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ADVFN Morning London Market Report: Monday 7 March 2022

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London open: Stocks slide as oil prices surge

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London stocks tumbled again on Monday as oil prices surged amid the ongoing Russia-Ukraine war.

At 0840 GMT, the FTSE 100 was down 1.7% at 6,870.71, while oil prices hit their highest level since 2008 after the US said over the weekend that it was in talks with European allies about a potential ban on imports from Russia.

Hussein Sayed, chief market strategist at Exinity, said: “Prices soared at the open in Asia, with Brent crude rallying $21 to trade slightly above $139 a barrel before slipping back below $130.

“Sanctioning Russian oil would be the most significant escalation in the West’s response to Moscow’s invasion of Ukraine, and it poses serious negative consequences for the global economy. While Russia’s economy will be hurt the most, Europe will likely fall into a recession and US growth will be hit, with consumers feeling the most pain.

“In 2008, demand destruction occurred when prices approached $140. Brent crude actually hit $147.50 in July 2008, shortly before the global financial crisis. Adjusting for inflation, prices need to go above $200 to have a similar effect on consumption. However, the current spike in prices is not a demand-driven shock but a supply-driven one, and there’s no ceiling in sight.

“Russia currently exports approximately 4.5 million barrels of crude. If exports were cut in half, prices would likely remain elevated in the short to medium-term around current levels, even if the US and other nations release oil from their strategic reserves. However, if the crisis gets worse and Europe imposes sanctions on Russian oil with no response from OPEC members, expect prices to jump above $200.”

In equity markets, banks were under the cosh, with LloydsBarclays and NatWest all weaker.

Travel-related shares also slid, with BA and Iberia owner IAGWizz AirTui and easyJet all down.

Oxford Instruments tanked after Spectris pulled its £1.7bn bid for the company, citing global market uncertainties caused by the “deplorable” events in Ukraine after the Russian invasion. Last week, Oxford Instruments said it had received a non-binding, indicative offer that included £19.50 a share in cash, plus new shares in Spectris worth £11.50 each.

On the upside, Russian steelmaker Evraz and Anglo-Russian precious metals miner Polymetal were the top gainers on the FTSE 100, having tumbled in recent days.

Miners rallied as metals prices rose, with Anglo AmericanGlencoreRio and Antofagasta all sharply higher.

Oil giants Shell and BP were also high risers amid surging oil prices.

 

Top 10 FTSE 100 Risers

# Name Change Pct Change Cur Price
1 Evraz Plc +48.33% +29.00 89.00
2 Bae Systems Plc +6.16% +42.60 734.20
3 Shell Plc +5.18% +95.00 1,928.40
4 Bhp Group Limited +4.67% +126.00 2,822.00
5 Fresnillo Plc +4.31% +32.00 774.00
6 Anglo American Plc +3.87% +148.00 3,976.00
7 Glencore Plc +3.68% +16.95 477.60
8 Antofagasta Plc +3.20% +49.00 1,581.00
9 Rio Tinto Plc +2.02% +122.00 6,150.00
10 Bp Plc +1.15% +4.00 352.15

 

Top 10 FTSE 100 Fallers

# Name Change Pct Change Cur Price
1 Tui Ag -12.39% -24.10 170.40
2 Lloyds Banking Group Plc -10.84% -4.67 38.37
3 Easyjet Plc -10.73% -51.00 424.30
4 Marks And Spencer Group Plc -9.95% -15.65 141.65
5 Coca-cola Hbc Ag -9.78% -154.00 1,421.00
6 International Consolidated Airlines Group S.a. -9.72% -12.00 111.48
7 Barclays Plc -9.39% -14.72 142.08
8 Melrose Industries Plc -8.94% -10.85 110.45
9 Carnival Plc -8.53% -102.00 1,093.60
10 Smurfit Kappa Group Plc -8.51% -259.00 2,786.00

 

Europe open: Stocks slump as West mulls Russian oil import ban

European stocks plunged at the open on Monday as the possibility of a ban on Russian oil imports ban spooked investors.

The pan-European Stoxx 600 index slumped 3.6% in early deals, with the German DAX and French CAC down more than 4.5%. London’s FTSE was down 2%, helped by gains in mining and energy stocks.

Brent crude prices raced towards $140 a barrel after US Secretary of State Antony Blinken said the America and European states were looking at potential bans on Russian oil in response to its unprovoked invasion of Ukraine.

Benchmark gas prices jumped 79% to €345 euros per megawatt-hour after. This follows a doubling of prices last week.

Russian gas exports, which make up about 30% of European demand, are currently not covered by sanctions.

“The current backdrop is also stoking stagflation concerns, with rising inflationary pressure unlikely to be offset by sufficient global economic growth to prevent a stagnant environment,” said Richard Hunter at Interactive Investor.

“This in turn has led to one of the few positive possible outcomes from the conflict, namely that central banks may need to consider reining in their increasingly hawkish attitudes to interest rates in light of a further blow to global economic recovery.”

“China has also taken a red pen to its estimates, cutting its economic growth target to around 5.5% for next year, while also increasing its military spending by 7.1%, both in recognition of the unfortunate direction which is currently playing out.”

In equity news, Russian gold miner Polymetal rebounded from last week’s hammering to gain 16.4%.

Miners GlencoreBHPAntofagasta and Anglo American made strong gains on higher metals prices.

On the downside the war in Ukraine continued to hit airline stocks, with Wizz Air and easyJet both down by more than 11%.

 

US close: Stocks fall amid mixed data, Ukraine invasion intensifies

Wall Street’s main market indices were in the red at the close on Thursday, following the release of a mixed batch of economic data. While investors kept a wary eye on the latest developments in Ukraine.

The Dow Jones Industrial Average ended the session down 0.29% at 33,794.66, as the S&P 500 lost 0.53% to 4,363.49 and the Nasdaq Composite was 1.56% weaker at 13,537.94.

Sentiment was grim amid news of intensified bombing of Ukrainian cities as the Russian fleet headed towards the Ukrainian port of Odessa, and with around one million war refugees now having reportedly already fled the country.

Delegations from Ukraine and Russia held a second meeting, but no particular progress was made.

When asked overnight whether the US might cut Russian oil and gas imports, president Joe Biden said that “nothing is off the table”, although an immediate move appeared unlikely due to the risk it could boost profits for Russian companies while hitting the American economy.

Speaker of the House Nancy Pelosi, however, backed banning imports of Russian oil.

Some observers were musing the need to offer Moscow potential ‘off ramps’ in order to try and deescalate the situation, rather than piling on massive sanctions.

Of those was Bloomberg‘s Clive Crook, who noted that for the US and Europe to work explicitly towards regime change in Moscow would be “extraordinarily risky” even if the current “drastic economic measures” were intended to “destroy the Russian economy and maybe lead to the overthrow of its government.”

“If the regime change scenario happens, this tension will be applauded as a necessary part of a brilliant strategy.

“If it doesn’t, the allies might regret failing to offer Putin an off-ramp.”

In economic news, fresh data from the Department of Labor revealed that the downwards trend in initial US jobless claims had resumed.

Growth in the US services sector slowed more sharply than expected in February, however, according to the Institute for Supply Management‘s closely-followed purchasing managers’ index (PMI).

The PMI slipped from a reading of 59.9 in January to reach 56.5, falling well short of consensus forecasts for a reading of 61.1.

In equities, electronics retailer Best Buy jumped 9.22% after it beat quarterly profit expectations.

Victoria’s Secret was ahead 1.77% after it also beat Wall Street estimates on sales and profit, although the lingerie and body spritz peddler warned shareholders inflation would be a hindrance to growth going forward.

On the downside, enterprise software developer Okta tumbled 8.06% on the back of a disappointing set of fourth quarter numbers.

 

Monday newspaper round-up: Burberry, Mastercard/Visa, British Airways

Burberry has become the latest luxury brand to temporarily shut its stores in Russia following Moscow’s invasion of its neighbour Ukraine, after similar moves in recent days by Louis Vuitton, Hermes, Kering, Chanel and Prada. The British fashion brand has three stores in the country, including one run by a franchisee and one in Moscow’s famous Red Square. It had already announced last week that it had halted deliveries to the outlets but confirmed this weekend that it was shutting them for the time being. – Guardian

Consumers will still be able to use Mastercard and Visa-branded cards for domestic transactions in Russia, the country’s state-backed payments network has said, reducing the impact of the US firms’ decision to pull services over the invasion of Ukraine. Russia’s homegrown payments system Mir said the cardholders would still be able to access their funds, make withdrawals and domestic transfers – at least until their bank cards expire. – Guardian

Germany and France will capitalise on post-Brexit rules to force British Airways to be spun-off as a standalone airline, the chief executive of Ryanair has claimed. Michael O’Leary said that politicians and lobbyists in the Eurozone’s two biggest economies are “gunning for” IAG, the FTSE 100 airlines group that owns BA. – Telegraph

The threat of strike action is looming over Britain’s largest gas distribution network company. The GMB union will launch a strike ballot for more than 2,000 members at Cadent Gas after employees “resoundingly” rejected a below-inflation pay rise of 4 per cent. Union bosses said that the offer amounted to a “massive” real-terms pay cut and added that the “cost-of-living crisis is hitting Cadent workers hard”. – The Times

AstraZeneca will go another £100 million over budget this year to complete its futuristic research and development centre and headquarters in Cambridge, despite having formally unveiled the site more than three months ago. The additional cost of the Discovery Centre, or Disc as it has been dubbed because of its structure, brings the total project costs to £1.1 billion, more than three times the initial estimate. – The Times

 

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