14th Feb 2022 17:05
(Alliance News) - Stocks in London ended sharply lower on Monday as fears over a potential Russian invasion of Ukraine intensified.
In the latest developments, Russia held open the door to further talks on resolving its standoff with the West and said some of its military drills were ending, signalling a possible easing of the crisis over Ukraine.
The comments came as German Chancellor Olaf Scholz, visiting Kyiv, vowed that Berlin and Western allies would maintain support for Ukraine's security and independence, urging Russia to take up "offers of dialogue".
During a televised meeting with President Vladimir Putin, Russian Foreign Minister Sergei Lavrov said "there is always a chance" to reach an agreement with the West over Ukraine.
The FTSE 100 index closed down 129.43 points, or 1.7%, at 7,531.59. The mid-cap FTSE 250 index ended down 430.82 points, or 2.0%, at 21,617.89. The AIM All-Share index ended 19.39 points, 1.8%, lower at 1,064.77.
The Cboe UK 100 index ended down 1.7% at 747.35. The Cboe 250 closed down 2.0% at 19,355.81, while the Cboe Small Companies ended 1.6% lower at 15,441.89.
In mainland Europe, the CAC 40 stock index in Paris ended down 2.3% and the DAX 40 in Frankfurt closed 2.0% lower.
US intelligence officials worry that weeks of crisis talks have given Russia the time to prepare a major offensive should Putin decide to attack Ukraine.
On Sunday, Washington warned that Russia was ready to strike at "any moment".
"The prospect of Russia invading Ukraine is hammering European equity markets. Tensions have been running high in the past few days as governments around the world have been advising their citizens to leave Ukraine, which speaks to the threat of war," said Equiti Capital analyst David Madden.
"Some of the fears surrounding the tense political stand off have disappeared as Sergei Lavrov, Russia's Foreign Minister, urged President Putin to continue talks with Western governments. As far as the markets are concerned, the atmosphere is still tense," Madden added.
In the FTSE 100, precious metal miners Fresnillo and Polymetal International ended the best performers, up 7.0% and 2.0% respectively, tracking spot gold prices higher. Midcap peers Centamin and Hochschild Mining both rose 1.9%.
The safe-haven metal stood at USD1,865.30 an ounce late Monday, higher against USD1,834.21 at the London equities close Friday.
At the other end of the large-caps, steelmaker Evraz ended the worst performer, down 30%.
"Evraz shares were sharply lower from Friday's close mainly due to the demerger of its coal assets which were consolidated under PJSC Raspadskaya and which took place today. The demerger meant that eligible Evraz shareholders would receive 0.425548 Raspadskaya shares for every share held or receive a cash payment equivalent," explained CMC Markets analyst Michael Hewson.
Elsewhere, JPMorgan Russian Securities, which invest in Russian assets, closed down 2.1%.
Travel stocks were also weaker. British Airways parent International Consolidated Airlines Group lost 5.6% and Wizz Air fell 6.3%.
JD Sports Fashion lost 3.5% after the athletic apparel retailer responded to a fine levied by the UK's competition watchdog.
JD Sports and Footasylum were fined nearly GBP4.7 million for collective breaches of an interim order issued by the UK's Competition & Markets Authority during an in-depth phase two merger investigation.
JD Sports responded to the CMA announcement, claiming any exchange of information was "limited" and "inadvertent" but conceded it was not reported to the CMA.
In the FTSE 250, Synthomer lost 7.5% after the speciality chemicals company cautioned that demand in a key rubber unit has been weak.
The chemicals company said that in its NBR business, margins have normalised to pre-virus levels. Nonetheless, demand at the unit remains "subdued" due to high inventory levels of medical gloves. NBR is frequently used in latex and surgical gloves.
The pound was quoted at USD1.3520 at the London equities close, down from USD1.3601 at the London equities close Friday.
The euro stood at USD1.1300 at the European equities close, down sharply from USD1.1406. Against the yen, the dollar was trading at JPY115.58, down from JPY115.89.
Stocks in New York were mostly lower at the London equities close amid concerns about higher US interest rates following comments from a prominent Federal Reserve official.
The DJIA was down 1.0%, the S&P 500 index down 0.9% but the Nasdaq Composite up 0.3%.
St Louis Fed President James Bullard said the Federal Reserve needs to accelerate the pace of interest rate increases to fight rising inflation, but can do so in a way that doesn't roil financial markets.
"Our credibility is on the line here," Bullard said on CNBC. After consumer prices saw their biggest jump in 40 years in January, he said the Fed should "front load" its actions and raise the benchmark borrowing rate to one percent by July.
Bullard, a voting member of the Fed's policy-setting committee, caused a sharp reaction by markets last week with similar comments on the need to remove stimulus from the economy provided during the Covid-19 pandemic.
Bullard said he would try to convince his central bank colleagues of the need to move quickly, but defer to Chair Jerome Powell.
The Ukraine crisis also sent oil prices sharply higher amid a pick-up in crude demand. Brent oil was quoted at USD94.70 a barrel at the equities close, up sharply from USD93.16 at the close Friday.
"Russia is the world's second-largest exporter of crude oil and the largest exporter of natural gas," said Commerzbank analyst Carsten Fritsch.
"If Russia invades Ukraine, crude oil and natural gas prices can be expected to surge significantly. In this case, Brent would probably exceed USD100 per barrel."
Europe has for months already suffered from soaring natural gas prices, which have fuelled rocketing domestic energy prices and sparked decades-high inflation.
"In the event of a Russia-Ukraine escalation we could be seeing a significant increase in domestic energy prices since much of Europe is heavily reliant on Russian oil and gas supplies," said XTB analyst Walid Koudmani.
"As energy prices have been a key contributor to the recent record levels of inflation, a further increase could spill over into the majority of the economy and potentially hinder an already fragile post-pandemic economic recovery."
The economic events calendar on Tuesday has UK unemployment data at 0700 GMT, eurozone GDP at 1000 GMT and US producer prices at 1330 GMT.
The UK corporate calendar on Tuesday has annual results from Swiss commodities house Glencore and contract-for-difference provider Plus500.
By Arvind Bhunjun; [email protected]
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