The FTSE 100 posted only modest losses on Wednesday in a session that saw risk mood turn sour and European bourses tumble by over 1%.
Coming to the blue-chip index's aid was its heavyweight oil sector and a weaker pound, with sterling unimpressed by Chancellor Rishi Sunak's ‘mini-budget’.
The FTSE 100 index closed down 16.09 points, or 0.2%, at 7,460.63. The FTSE 250 ended down 110.98 points, or 0.5%, at 21,001.62, and the AIM All-Share closed down 0.74 of a point, or 0.1%, at 1,036.84.
The Cboe UK 100 ended flat at 742.27, the Cboe UK 250 closed down 0.6% at 18518.64, and the Cboe Small Companies ended down 0.5% at 15034.43.
In European equities on Wednesday, the CAC 40 in Paris ended down 1.2%, while the DAX 40 in Frankfurt ended down 1.3%.
Ending at the top of London's FTSE 100 was BP, up 4.5%, while shares in peer Shell rose 3.9%. The two were boosted as the price of Brent oil was quoted at $121.99 a barrel at the London equities close Wednesday, jumping from $115.05 late Tuesday.
Russian Deputy Prime Minister Alexander Novak on Wednesday warned that a ban on Russian oil and gas imports over the Ukraine war - which some EU countries are demanding - would drive the world's energy markets to a ‘collapse’.
‘It is absolutely obvious that without Russian hydrocarbons, if sanctions are introduced, there will be a collapse of the oil and gas markets,’ Novak told Russia's lower house State Duma as reported by Russian news agencies.
President Vladimir Putin, meanwhile, hit back at ‘unfriendly countries’ - which include EU members - as he announced that Russia will now only accept rubles for gas deliveries.
Russia also warned that repairs at a terminal near a Black Sea port may take up to two months and lead to a drop in oil exports of about one million barrels per day.
Wednesday's spike in oil prices led to renewed inflationary fears, especially after data in the morning showed the UK consumer price index rose by 6.2% on an annual basis in February, accelerating sharply from a 5.5% rise in January. The reading was higher than the market forecast, cited by FXStreet, of 5.9%.
The inflation data offered a prelude to UK Chancellor Rishi Sunak's 'spring statement', in which he revealed the Office for Budget Responsibility downgraded growth in gross domestic product from the 6% forecast for this year at the time of the government budget in October to just 3.8%.
With inflation at a 30-year high, Sunak promised a series of measures to help household finances - including a 5p per litre cut in fuel duty and a £3,000 increase in the national insurance threshold.
‘The package of new support of around £9.2bn (0.4% of GDP) in 2022/23 announced by the Chancellor in today's Fiscal Spring Statement is similar to our expectations. But he did go a bit further by also loosening policy in future years, partly by cutting the basic rate of income tax by 1p from 2024/25. Even so, this still leaves households having to absorb about a £20bn hit to their real disposable incomes from rising food, petrol and utilities prices by the end of 2023,’ said Capital Economics.
The pound was quoted at $1.3201 at the London equities close Wednesday, down compared to $1.3255 at the close on Tuesday.
In London, housebuilders ended lower amid worries over higher inflation as well as data showing UK house price growth slowed at the start of 2022.
On an annual basis, the ONS UK house price index rose by 9.6% in January, slowing from a 10.0% rise in December. London continued to be the region with the lowest annual growth at 2.2% in January, slowing sharply from 5.1% in December.
Shares in Taylor Wimpey fell 4.0%, Barratt Developments ended down 4.1% and Persimmon fell 2.5%.
Elsewhere in London, Saga shares dropped 8.4% after the over-50s insurer posted a narrowed annual loss but decided against providing formal guidance for the new financial year.
In the financial year ended January 31, Saga's pretax loss narrowed to £23.5 million from £61.2 million. Revenue rose 12% to £377.2 million from £337.6 million, boosted by the resumption of its travel arm.
Citing Covid-19 uncertainty, however, the company opted against providing earnings guidance for the new financial year. In January, however, it had said it expected to return to profit in financial 2023.
Dignity shares fell 12% as the company warned of lower profit ahead in the short term due to lower prices and the death rate normalising as the pandemic begins to wind down.
For 2021, the group reported a pretax profit of £32.0 million, compared to a loss of £19.6 million the year before, due mainly to a doubled gain in the remeasurement of financial assets held by the trusts at £94.8 million. On an underlying basis, pretax profit dropped 12% to £26.8 million.
Looking ahead, Dignity expects to report lower profit in the short term. This is due to lower prices and a normalising the UK death rate as the danger of Covid-19 dissipates and the excess death effect of the past two years start to reverse.
Stocks in New York were lower at the London equities close, with the DJIA down 0.9%, the S&P 500 index down 0.5%, and the Nasdaq Composite down 0.2%.
The dollar remained supported by recent hawkish comments from US Federal Reserve Chair Jerome Powell and Wednesday's risk-off mood.
The euro stood at $1.1005 at the European equities close Wednesday, soft against $1.1014 at the same time on Tuesday. Against the yen, the dollar jumped to JP¥121.03 compared to JP¥120.55 late Tuesday.
Safe haven gold recovered some recent losses amid Wednesday's cautious mood. Gold was quoted at $1,933.76 an ounce at the London equities close, up against $1,922.93 at the close on Tuesday.
The economic calendar on Thursday holds a raft of PMIs, with Japan's out overnight, Germany at 0830 GMT, the eurozone at 0900 GMT and the UK at 0930 GMT. US initial jobless claims are at 1230 GMT followed by the PMI at 1345 GMT.
The UK corporate calendar on Thursday has full-year results from clothing retailer Next, private equity firm Bridgepoint and toll and fuel payments processor WAG Payment Solutions.
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