Stocks in London closed deep in the red Tuesday, with Russian attacks in eastern Ukraine and the threat of harsher economic sanctions keeping the crisis fresh in investor minds.
On day six of Russia’s invasion of its neighbour, officials in Ukraine’s second city, Kharkiv, said the Russian army had shelled the local administration building, killing at least 10 people.
On the corporate front, Centrica is the latest firm to start distancing itself from Russia, while companies with close links continue to plunge in value, to the point of Polymetal and Evraz being at risk of leaving the FTSE 100.
The FTSE 100 index closed down 128.05 points, or 1.7%, at 7,330.20. The mid-cap FTSE 250 index ended down 580.41 points, or 2.8%, at 20,500.64. The AIM All-Share index lost 13.09 points, or 1.3%, at 1,027.27.
The Cboe UK 100 index ended down 1.8% at 729.25. The Cboe 250 closed down 2.9% at 18,206.05, and the Cboe Small Companies ended down 1.6% at 14,576.64.
In mainland Europe, the CAC 40 in Paris and DAX 40 in Frankfurt both closed down 3.9%.
On Monday, stocks had recovered some poise in afternoon trade, though this was far from the case on Tuesday, with major European benchmarks closing near session lows as equities struggled, safe havens rose, and oil prices surged as tensions showed little sign of easing.
Western powers are planning ever more stringent sanctions.
‘We will bring about the collapse of the Russian economy,’ French Finance Minister Bruno Le Maire told the Franceinfo broadcaster.
The British government said Western sanctions would remain ‘for as long as it takes’ and warned Putin himself could face prosecution for war crimes.
Western sanctions against Russia are having a huge impact on its economy, Germany’s finance minister said.
Sanctions have ‘already had a massive impact on capital markets and the currency’, said Christian Lindner, whose country holds the rotating presidency of the G7 club of wealthy nations.
The aim of the sanctions is to ‘isolate Russia politically, financially and economically’, Lindner said.
Brent prices topped the $106 a barrel mark for the first time since August 2014. The North Sea benchmark traded at $106.10 a barrel at the time of the London equity market close on Tuesday, up sharply from $97.65 on Monday.
Gold was also on the up, climbing to $1,930.54 an ounce late Tuesday, from $1,900.27 late Monday, amid the flight to safety.
Nervy trade also boosted the yen. The dollar fell to JP¥114.89 late Tuesday, from JP¥115.27 at the same time on Monday.
The pound, meanwhile, fell to $1.3334 from $1.3415. The euro dropped to $1.1109 from $1.1243.
Sterling weakened despite data showing UK manufacturing sector activity accelerated in February.
The IHS Markit-CIPS manufacturing purchasing managers’ index rose to a three-month high of 58.0 points in February, up from the preliminary reading of 57.3, which also was January's score. The PMI has remained above the neutral 50.0 mark for 21 successive months, Markit noted.
Eurozone manufacturing growth slowed, with the PMI falling to 58.2 in February, from 58.7 in January.
In London, British Gas owner Centrica fell 3.7%. The FTSE 250 constituent was one of the latest to exit Russia.
Chief Executive Chris O’Shea said: ‘We are shocked by the events unfolding in Ukraine and the needless loss of lives. We intend to exit our gas supply agreements with Russian counterparts, principally Gazprom, as a matter of urgency. We are working through the details of how best to do this, additionally we will ensure we are compliant with all relevant sanctions.’
Centrica has a ‘medium-term’ pact with Gazprom which sees the Russian energy firm provide ‘some gas volumes’.
Centrica explained: ‘It is a fraction of our downstream demand and the gas is not physical gas molecules from Russia - they can be sourced anywhere. This supply contract is not currently impacted by current UK sanctions; however, we are exploring how we can terminate this contract and have entered into discussions with Gazprom about exiting this agreement.’
Centrica’s decision follows the likes of BP and Shell who have also moved to distance themselves from Russia.
Stocks with strong ties to Russia fell at the close. Gold miner Petropavlovsk was the biggest FTSE 250 faller, slumping 38%.
Also beleaguered was blue-chip counterpart Polymetal International, tumbling 26% and steel maker Evraz, falling 29%. The duo now look set to leave the FTSE 100.
The latest FTSE All Share Index quarterly review, to be announced after the closing bell on Wednesday, is based on Tuesday’s closing prices.
Reach shares dropped 9.7%. The newspaper publisher warned the damage caused by rising inflation in 2022 is expected to be worse than in recent years and lead to a ‘modest’ reduction in operating profit.
For 2021, pretax profit was £73.3 million, up from £400,000 in 2020 on revenue of £615.8 million, up from £600.2 million in 2020. Operating profit rose to £146.1 million from £133.8 million.
JPMorgan Russian Securities slumped 30%. The Russia-focused investor said just under 50% of its portfolio is comprised of locally-listed stocks it is currently not allowed to trade in due to restrictions.
In New York, stocks were weaker at the time of the closing bell in London. The Dow Jones Industrial Average was down 1.4%, the S&P 500 1.0% lower and the Nasdaq Composite down 0.8%.
Zoom Video Communications was down 4.8%. The video conferencing firm reported annual results late Monday and its outlook underwhelmed.
Zoom, which has become synonymous with conferencing after seeing its fame and fortune skyrocket during the pandemic, expects revenue growth to slow in its latest financial year.
Wednesday’s economic calendar has a eurozone inflation estimate at 1000 GMT. In the UK, the latest British Retail Consortium shop price index is reported overnight, before the Nationwide house price index at 0700 GMT.
The local corporate calendar has annual results from insurers Aviva and Hiscox and housebuilders Persimmon and Vistry. Just Eat Takeaway.com also posts full-year numbers.
Copyright 2022 Alliance News Limited. All Rights Reserved.
