Last week's volatility continued into Monday's session, with a positive start for European markets wiped out by a fresh escalation of tensions between Russia and Ukraine.
This overshadowed upbeat data showing business activity in the UK boomed in February as Omicron's economic hit faded.
‘The latest PMI surveys indicate a resurgent economy in February, as business activity leapt as Covid-19 containment measures were relaxed,’ Chris Williamson, chief business economist at IHS Markit, commented on the UK PMI data.
The FTSE 100 index closed down 29.29 points, or 0.4%, at 7,484.33. The FTSE 250 ended down 265.41 points, or 1.2%, at 21,097.19, and the AIM All-Share closed down 18.49 points, or 1.7%, at 1,041.53.
The Cboe UK 100 ended down 0.4% at 743.48, the Cboe UK 250 closed down 1.1% at 18,867.74, and the Cboe Small Companies ended down 1.6% at 15,276.31.
In European equities on Monday, the CAC 40 in Paris ended down 2.0%, while the DAX 40 in Frankfurt tumbled 2.1%.
‘It has already proved to be a very volatile start to the new week. The day started with gaps on index futures overnight, before a sharp rally on the back of news of a possible Biden-Putin meeting. However, the indices then gave up those gains to drop to fresh lows,’ said Fawad Razaqzada, market analyst at ThinkMarkets.
Sentiment took a hit after the Kremlin warned Monday there are no concrete plans for a summit between the Russian and US leaders, as diplomats scrambled to head off the threat of a Russian invasion of Ukraine.
The idea of a meeting between presidents Vladimir Putin and Joe Biden has been championed by France and cautiously welcomed by Ukraine as a way to avert a catastrophic war in Europe.
But Putin's spokesman Dmitry Peskov said: ‘It's premature to talk about any specific plans for organising any kind of summits’ adding that no ‘concrete plans’ had been put in place.
The Ukraine conflict escalated sharply on Monday, with Moscow claiming it had killed five Ukrainian ‘saboteurs’ that crossed its border. Ukraine said ‘not a single one of our soldiers has crossed the border with the Russian Federation, and not a single one has been killed today.’
What started as a cautiously optimistic day for European markets ended with losses. The MOEX Russia Index in Moscow slumped 11%.
In London, shares in Russian precious metals miner Polymetal tumbled 8.5% while Russian steelmaker Evraz slumped 5.7%. Coca-Cola HBC, which counts Russia as one of the 28 markets in which it operates, ended down 4.5%.
While Polymetal declined and mid-cap Petropavlovsk, a gold miner with operations in Russia, tumbled 17%, shares in precious metals mining peer Fresnillo ended up 1.6%. Safe haven asset gold was quoted at $1,896.42 an ounce at the London equities close Monday, up against $1,893.40 at the close on Friday.
JPMorgan Russian Securities, a Russia-focused investor, shed 11%.
Another safe haven asset, the Japanese yen, also gained ground amid Monday's nerves. Against the yen, the dollar was trading at JPY114.83, down compared to JPY115.11 late Friday.
Also getting a boost was oil, on anticipation of supply disruption should tensions over Ukraine escalate. Brent oil was quoted at $95.19 a barrel at the London equities close Monday, up from $92.85 late Friday.
At the top of the FTSE 100 was AstraZeneca, rising 4.0% after reporting phase three trials for Enhertu showed positive outcomes in metastatic breast cancer patients and could ‘redefine how the disease is classified and treated’.
The Cambridge, England-based pharmaceutical company said Destiny-Breast04 phase three trials had shown Enhertu showed a ‘statistically significant and clinically meaningful improvement’ when compared to chemotherapy in both progress-free survival and overall survival in patients with low human epidermal growth factor receptor 2 unresectable and, or metastatic breast cancer, regardless of their hormone receptor status.
Elsewhere in London, Clipper Logistics rose 13% after agreeing to be acquired by Connecticut, US-based warehousing and distribution company GXO Logistics Inc for £941 million in cash and shares.
The offer values Clipper shares at 920 pence each. The Leeds, England-based e-fulfilment services company said the offer was to acquire Clipper shares for a combination of cash and new GXO shares. The offer comprises 690p per Clipper share in cash, plus new GXO shares valued at 230p.
The company said its board was ‘minded to recommend [the offer] unanimously’ to Clipper shareholders should a firm offer be made on the same financial terms as the potential offer.
Made.com fell 9.8% after the retailer said Chief Executive Officer Philippe Chainieux has stepped down immediately due to ‘family reasons’. The London-based homeware and furniture retailer said Nicola Thompson will take on the role of interim CEO with immediate effect.
In economic data on Monday, figures showed UK private sector activity picked up in February driven by a recovery in economic conditions after disruptions due to the Omicron variant at the turn of the year.
The flash UK services purchasing managers' index reading was 60.8 points in February, up sharply from 54.1 in January. The score beat the market forecast, cited by FXStreet, of 55.5. The flash UK manufacturing PMI was 57.3 points in February, unchanged from January, but slightly above market expectations of 57.2.
IHS Markit said private sector output expanded at the fastest pace for eight months, led by a strong recovery in consumer spending on travel, leisure and entertainment.
The pound was quoted at $1.3607 at the London equities close Monday, higher compared to $1.3584 at the close on Friday.
Meanwhile, the euro firmed a touch to $1.1338 at the European equities close Monday against $1.1334 at the same time on Friday after IHS Markit showed business activity in the eurozone is in line for bumper growth in February.
The flash IHS Markit eurozone composite PMI surged 3.5 points in February to 55.8, up from January's final reading of 52.3. IHS Markit noted this is the largest monthly gain since March of last year.
The UK corporate calendar on Tuesday has full-year results from miner Antofagasta, Holiday Inn parent InterContinental Hotels Group and medical technology firm Smith & Nephew.
Tuesday's economic calendar has the German Ifo index at 0900 GMT and a US PMI at 1445 GMT. Financial markets in the US will re-open on Tuesday after Monday's Presidents' Day holiday.
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