Equity markets were unsettled globally on Tuesday, after Russia recognised two breakaway regions of Ukraine and sent in troops, but the FTSE 100 managed a small gain by midday thanks to higher oil prices.
Russian troops were believed to be deploying into Donetsk and Lugansk in eastern Ukraine, after President Vladimir Putin issued decrees ordering his army to assume ‘peacekeeping’ functions in the separatist territories.
The US, UK and the EU on Tuesday prepared to impose economic sanctions on Russia in response, with Germany already announcing it is suspending the Nord Stream 2 pipeline project.
‘Our response will be in the form of sanctions, whose extent the ministers will decide,’ EU foreign policy chief Josep Borrell said.
Russia’s recognition of the breakaway regions of Ukraine will ‘strongly increase’ economic uncertainty for the EU, the bloc’s economy commissioner Paolo Gentiloni said.
Commented Oxford Economics: ‘A limited Ukraine incursion would dampen the €opean recovery via higher inflation, squeezing real incomes. Although we do not think the recovery would be derailed, recent developments represent a clear downside risk to our outlook.’
The FTSE 100 index was up 22.41 points, or 0.3%, at 7,506.74. The mid-cap FTSE 250 index was down 18.99 points, or 0.1%, at 21,078.20. The AIM All-Share index was down 8.53 points, or 0.8%, at 1,033.00.
In mainland €ope, the CAC 40 in Paris was down 0.1%, while the DAX 40 in Frankfurt was 0.2% lower.
In the FTSE 100, Smith & Nephew was the best performer, up 4.7%, after the medical device maker reported a rise in annual revenue and launched a share buyback programme.
For 2021, Smith & Nephew posted a trading profit of $936 million, up 37% from $683 million in 2020 on revenue of $5.21 billion, up 14% from $4.56 billion. Pre-tax profit was $586 million, more than doubled from $246 million.
Smith & Nephew declared a final dividend of 23.1 US cents. This resulted in a full-year dividend of 37.5 cents, unchanged from 2020 and 2019. It also made a new commitment to return surplus cash to shareholders in the form of a regular annual buyback, expected to be between $250 million and $300 million in 2022.
Oil majors Shell and BP were up 2.1% and 0.8%, respectively, tracking spot oil prices higher.
Brent oil was trading at $98.09 a barrel Tuesday at midday, up sharply from $95.19 late Monday.
Russia’s decision to recognise the two separatist regions of Ukraine and send in troops to the area was sending the North Sea benchmark towards $100 a barrel, having hit its highest level since 2014 of $99.50 early Tuesday.
German Chancellor Olaf Scholz said on Tuesday that he is suspending the Nord Stream 2 pipeline project. Scholz said he had asked to halt the review process by the German regulator for the pipeline.
‘That sounds technical, but it is the necessary administrative step so there can be no certification of the pipeline and without this certification, Nord Stream 2 cannot begin operating,’ he said.
Separately, Russian President Vladimir Putin said gas deliveries will not be suspended despite the growing stand-off with the West over Ukraine. ‘Russia intends to continue uninterrupted supplies of this raw material, including liquefied natural gas, to world markets,’ Putin said in Moscow on Tuesday, according to the Kremlin.
Antofagasta was up 3% after the miner said profit had more than doubled in 2021, with revenue boosted by almost 50% on the back of higher copper prices.
For 2021, the Chilean miner reported profit before tax had more than doubled to $3.48 billion, up from $1.41 billion the last year. Revenue was $7.47 billion, up 46% from $5.13 billion, reflecting a 47% increase in realised copper prices.
Copper sold for an average of $4.37 per pound in 2021, up from $2.98 per pound in the year prior. Prices reached an all-time high in May at $4.86 per pound before stabilising.
Antofagasta declared a final dividend of 118.9 cents per share, bringing the total for the year to 142.5 cents, equivalent to 100% of underlying earnings per share. The total dividend in 2020 was 54.7 cents.
InterContinental Hotels Group was up 2.8% after the Holiday Inn and Crowne Plaza chain operator said trading improved significantly in 2021 as vaccination rates rose and travel restrictions were lifted around the world.
For 2021, IHG swung to a pre-tax profit of $361 million from a loss of $280 million in 2020 on total revenue that was up 21% to $2.91 billion from $2.39 billion.
IHG declared a total dividend 85.9 US cents for 2021, having paid out nothing the year before.
HSBC was up 0.8% after the Asia-focused bank posted a sharp jump in profit in 2021, with all its regions recording a positive year.
The lender also unveiled a new $1 billion share buyback programme.
HSBC reported pre-tax profit of $18.91 billion for 2021, doubled from $8.78 billion in 2020 - but coming in behind market forecasts of $19.12 billion.
At the other end of the large-caps, Hargreaves Lansdown was the worst performer, down 14%, as the fund supermarket unveiled plans to spend £175 million on a strategic revamp.
Coca-Cola HBC, which operates in both Russia and Ukraine, was down 5%.
Amid the stand-off between the two countries, the soft drinks bottler issued annual results. It raised its payout following a double-digit rise in profit and revenue as a result of higher volumes.
For 2021, Coca-Cola HBC posted a pre-tax profit of €734.9 million, up 23% from €593.9 million the year before. Net profit rose 32% to €547.2 million from €414.9 million.
Coca-Cola HBC declared a dividend of €0.71 per share, up 11% from €0.64 the year before. In addition, the group had raised its payout ratio target to 40% to 50%, from the prior ratio of 35% to 45%.
Looking ahead, Coca-Cola HBC said it expects net finance costs for 2022 to be around €15 million to €20 million higher than 2021, mainly due to its high-profile investment in Egypt.
In the FTSE 250, John Wood was the worst performer, down 11%. The consulting and engineering firm warned it will take a $100 million exceptional charge against 2021 results, related to Aegis Poland, a legacy Amec Foster Wheeler project.
The Aberdeen, Scotland-based firm said $20 million of that will be in cash to complete the project, with the rest being non-cash charges for ‘expected recovery from the customer and the legal costs needed to achieve such recovery’.
John Wood will delay its annual results from the originally scheduled March 8 to allow for the audit process related to the project. However, the company said that its underlying results for 2021 and outlook for 2022 remain unchanged from the trading update it provided in January.
The pound was quoted at $1.3574 at midday on Tuesday, down from $1.3607 at the London equities close Monday.
Against the safe-haven yen, the dollar was trading at JPY114.90 in London, higher against JPY114.83. Japanese financial markets will be closed on Wednesday for the Emperor’s Birthday holiday.
Gold gave back some of its earlier gains, trading at $1,894.80 an ounce, soft from $1,896.42 late Monday.
Financial markets in the US will re-open on Tuesday after Monday’s Presidents Day holiday and were pointed lower.
The Dow Jones Industrial Average was called down 0.2%, the S&P 500 down 0.9%, and the Nasdaq Composite down 1.8%, based on futures trading.
On Wall Street, Home Depot was up 1.2% in pre-market trade after the home improvement retailer posted a rise in fourth-quarter earnings.
For the three months to December 31, net earnings were $3.4 billion, or $3.21 per diluted share, up from net earnings of $2.9 billion, or $2.65 per diluted share, in the fourth quarter of 2020.
The Atlanta, Georgia-based firm expects earnings per share growth to be in the low single-digits and sales growth to be ‘slightly positive’ in the coming year.
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