European financial markets remained calm early Monday, after the dramatic turn of events in Russia over the weekend; however uncertainty about the fall-out from the failed mutiny by the Wagner mercenary army contributed to a risk-off investment atmosphere.
‘What has happened during this weekend shows that the war against Ukraine is cracking Russian power and affecting its political system,’ EU foreign policy chief Josep Borrell said at a meeting of the bloc’s foreign ministers.
‘Certainly it’s not a good thing to see that a nuclear power like Russia can go into a phase of instability. It’s also something that has to be taken into account,’ Borrell told journalists.
The FTSE 100 index opened down 18.77 points, or 0.3%, at 7,443.10. The FTSE 250 was down 47.71 points, also 0.3%, at 18,014.62, and the AIM All-Share was down 2.19 points, or 0.3%, at 764.88.
The Cboe UK 100 was down 0.2% at 742.43, the Cboe UK 250 was down 0.6% at 15,726.68, and the Cboe Small Companies was down 0.3% at 12,955.35.
Wagner mercenaries declared a sudden pull-back on Sunday from marching towards Moscow after Russian President Vladimir Putin agreed to allow their leader to avoid treason charges and accept exile in neighbouring Belarus.
The agreement halted an extraordinary crisis – a private army led by Putin’s former close ally Yevgeny Prigozhin trying to storm Moscow – but analysts said Wagner’s revolt had exposed Putin’s rule as more fragile than previously thought.
The events in Russia had little discernible impact on foreign exchange markets, analysts at ING said. Instead, the ‘hot topic’ high inflation and what policymakers are prepared to do about it remains the market’s priority.
‘Both central bankers and governments are under fire for having kept monetary and fiscal policy respectively too loose for too long. These (or at least monetary policy anyway) will be the hot topic for this week,’ said Chris Turner at ING.
Sterling recovered slightly on Monday morning after seeing no lasting gain last week from a surprisingly hawkish 50-basis-point interest rate hike by the Bank of England.
The pound was quoted at $1.2732 early on Monday in London, higher compared to $1.2709 at the close on Friday.
The dollar was lower against other major currencies as well.
The euro stood at $1.0903, higher against $1.0888.
ING’s Turner said, on the surface, the narrative of central bankers needing to keep higher rates for longer is ‘not a good one for the pro-cyclical euro’, but a hawkish European Central Bank has provided ‘some defence against high US interest rates’.
Against the yen, the dollar was trading at JP¥143.19 early Monday in London, down from JP¥143.73 late Friday.
On the London Stock Exchange, Associated British Foods lost 0.3% despite saying it now expects full-year adjusted operating profit to be ‘moderately’ ahead of last year, following a strong third quarter.
In the 12 weeks ended May 27, the fast-fashion retailer and food manufacturer reported revenue growth of 16% against the prior year at constant currency.
AB Foods saw double-digit percentage revenue growth across all its business segments at constant currency, apart from Agriculture which saw 4% growth year-on-year, it said.
Following the update, Shore Capital reiterated its ’buy’ recommendation on AB Foods shares, citing ‘scope for capital appreciation for underlying growth and rating expansion in forthcoming periods’.
In the FTSE 250, Aston Martin climbed 9.1%.
The carmaker said it has entered into a supply agreement with the US’s Lucid Group and amended a separate agreement with Mercedes-Benz.
Aston Martin and Lucid have agreed integration and supply agreements that will provide Aston Martin with access to Lucid’s technology for its battery electric vehicle, including electric powertrains and battery systems.
As a result of the agreement, Lucid will become a 3.7% shareholder in Aston Martin and also receive $132 million in cash from the UK firm.
Aston Martin separately agreed to continue its cooperation with Germany’s Mercedes-Benz.
Under the agreement, Aston Martin will issue no additional shares to Mercedes-Benz in exchange for access to further technology. This is replaced with a restated commitment to the existing collaboration, allowing the companies to discuss future access to technology for cash. Mercedes will remain a 9.4% shareholder in Aston Martin and retain its board seat.
Elsewhere in London, Braemar plunged 16% after it said that it will not meet the UK Financial Conduct Authority’s deadline for the publication of its full-year results.
This confirmed a report from Sky News on Sunday that shipbroker was likely to tell investors within the coming days that it will be unable to meet the publication deadline.
As a result, the company’s shares will be suspended from trading next Monday.
On AIM, IOG jumped 17%.
The UK-focused offshore gas developer said it had successfully completed the wireline intervention at the Blythe H2 well, adding that the well has now flowed at a maximum stabilised rate around 42 million standard cubic feet per day, slightly above its original 30 million to 40 million guidance.
Shares in Microsaic Systems were down 50%.
Microsaic Systems said partner DeepVerge owes it £1.4 million in unpaid invoices, and it will need to raise additional working capital in the third quarter if these are not paid.
For its part, DeepVerge was suspended from trading on AIM on Monday, pending clarification of its financial position. The company had been seeking to sell one or more of its business units in order to raise sufficient funds to allow it to continue to trade. However, the environmental and life sciences company failed to do so.
As a result, DeepVerge said it is unlikely that sufficient funds will be raised in time to allow its business units to continue to trade. The company said it has taken the decision to no longer support the ongoing costs of these businesses. DeepVerge said it is now seeking to realise ‘whatever value is possible’ through the sale of one or more of its Labskin, Modern Water and Glanaco business units. It expects this process will result in the sale, closure or administration of all its subsidiaries.
In European equities, the CAC 40 in Paris and the DAX 40 in Frankfurt were both 0.3% lower on Monday morning.
In Tokyo on Monday, the Nikkei 225 index closed down 0.3%. In China, the Shanghai Composite closed down 1.5%, while the Hang Seng index in Hong Kong finished 0.5% lower.
China on Sunday said it supported Russia in ‘protecting national stability’, in Beijing’s first official remarks on a short-lived armed uprising led by the head of the Wagner mercenary group Yevgeny Prigozhin.
‘As a friendly neighbour and a new era comprehensive strategic cooperative partner, China supports Russia in protecting national stability and achieving development and prosperity,’ the foreign ministry said in a statement.
The S&P/ASX 200 in Sydney closed down 0.3%.
Brent oil was quoted at $74.44 a barrel at early in London on Monday, up from $73.71 late Friday. Gold was quoted at $1,926.08 an ounce, higher against $1,922.24.
In the US on Friday, Wall Street ended lower. The Dow Jones Industrial Average closed down 0.7%, the S&P 500 closed down 0.8% and the Nasdaq Composite closed down 1.0%.
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