Oil was the major mover in financial markets on Thursday, while equities were narrowly mixed, after hopes for a quick resolution of the Ukraine crisis were dashed.
Oil prices continued to fall heading into the European afternoon and ahead of the latest meeting of oil producing cartel OPEC. US President Joe Biden is mulling tapping into strategic oil reserves to combat a supply crisis exacerbated by Russia's invasion of Ukraine.
In London, the FTSE 100 index was down 21.25 points, or 0.3%, at 7,557.50 midday Thursday. The mid-cap FTSE 250 index inched up just 2.51 points to 21,274.98. The AIM All-Share index was down 3.02 points, 0.3%, at 1,043.66.
The Cboe UK 100 index was flat at 752.22. The Cboe 250 was up 0.1% at 18,730.83, and the Cboe Small Companies was marginally higher at 15,370.99.
In Paris, the CAC 40 index was down 0.5%, while the DAX 40 in Frankfurt slipped 0.2%.
‘We think it will take weeks, probably months, before any peace deal between Russia and Ukraine can be achieved,’ analysts at Danske Bank commented.
‘Any peace deal is likely to be placed under a referendum in Ukraine, and in the context of rising patriotism, we do not think the Ukrainian public is ready for any substantial concessions to end the war yet. Instead, they want to win the war.’
A barrel of Brent oil fetched $105.44 midday Thursday UK time, down from $113.56 at the London equities close on Wednesday.
AJ Bell analyst Russ Mould commented: ‘It is noteworthy that despite Biden pledging the biggest release from the reserve since the 1970s, oil remains stubbornly above $100 per barrel.
‘You can understand why the US leader felt he had to do something, given the political heat he is getting for rising fuel prices. However, a speculated release of one million barrels of oil per day over the coming months has to be seen in the context of total global output of around 100 million barrels per day.’
OPEC and other major producers including Russia come together for their monthly meeting where they are expected to refrain from lifting output by more than their planned 400,000 barrels per day, despite the growing energy crisis.
‘With Russia invading Ukraine and the West subsequently sanctioning Russia, commodity markets are being hit by a substantial supply shock at a time of already-low stocks,’ commented Edward Gardner, commodities economist at Capital Economics.
‘And, crucially, the full extent of the shock is not yet known, which is arguably the main reason for today's volatility. We think volatility will remain high at least until the war ends and the full extent of the supply shock becomes clearer.’
The pound gave up ground against the dollar, despite decent UK economic growth figures.
Sterling faded to $1.3125 midday Thursday in London from $1.3163 late Wednesday.
Data from the Office of National Statistics showed the UK economy expanded at a faster pace than expected in the fourth quarter of 2021, despite the emergence of the Omicron variant of Covid-19.
Gross domestic product expanded 1.3% quarter-on-quarter in the final three months of last year. The figure topped the previous estimate, which showed 1.0% growth.
Meanwhile, the dollar was up against the euro but down against the yen. The euro was quoted at $1.1091 midday Thursday, down from $1.1163 late Wednesday. Against the Japanese currency, the dollar fell to JP¥121.84 from JP¥121.94.
Still to come on Thursday are the latest US jobless claims reading and the core personal consumption expenditure figures at 1330 BST. The latter is an inflationary gauge closely watched by the US Federal Reserve.
Annual PCE inflation is forecast to have accelerated to 5.5% in February, from 5.2% in January, according to consensus cited by FXStreet.
BDSwiss analyst Marshall Gittler commented: ‘The market expects a further rise in inflation, which I don't think would surprise anyone. It might however convince people that the Fed was indeed liable to hike nine times this year and so could support the dollar.’
Ahead of the economic data, US stocks were called to open higher. The Dow Jones Industrial Average was called marginally up, the S&P 500 up 0.1%, and the Nasdaq Composite up 0.4%.
In London, Brewin Dolphin shares jumped 61%, as the financial adviser agreed to a £1.6 billion buyout from Royal Bank of Canada.
RBC will pay 515p per Brewin Dolphin share, a 62% premium to its 318p closing price on Wednesday. Brewin Dolphin shares were trading at 512.27 pence on Thursday.
The buyout is an ‘exciting strategic opportunity’ for RBC, allowing the Toronto-based lender to combine its UK and Channel Islands wealth management arm with the FTSE 250 constituent.
Brewin peers Rathbones and Brooks Macdonald were up 11% and 5.7% in a positive read-across.
There were M&A moves elsewhere in London.
Beauty brands business Brand Architekts and InnovaDerma, a developer and marketer of beauty and personal care products, have agreed to a merger.
The deal will see InnovaDerma shareholders receive 7p in cash plus 0.3818 of a new Brand Architekts share for each share they own.
Based on Brand's 106.5p closing price on Wednesday, the deal values InnovaDerma shares at 47.7p and the company at £13.6 million.
InnovaDerma shares were 24% higher at 34.60p each midday Thursday, giving it a market value of £9.7 million. Brand Architekts, however, slumped 20% to 85.50p, valuing it at £14.7 million.
Back among London mid-caps, Trainline rose 21%. It reached an agreement to amend its third-party retail licence, providing the transport ticketing platform ‘greater certainty’ even though it is likely to see a cut in commission.
The online train and coach ticketing platform said it has reached agreement with Rail Delivery Group on a memorandum of understanding over the licence, and will now enter into a ‘collaborative phase of engagement’ on new terms.
If new contractual terms cannot be agreed, under the memorandum, RDG has the right to implement a legally binding minimum set of terms. Trainline estimates this would result in a 0.25% net reduction in its commission rate, effective April 1, 2025.
The minimum terms include a 0.5 percentage point reduction in the base business-to-consumer online sales commission rate, to 4.5% from 5.0%, and an offsetting removal of central industry costs of around 0.25%.
‘This is a step forward in providing greater certainty to Trainline. It allows us to invest further in product innovation and marketing to encourage more people back to rail,’ said Chief Executive Jody Ford.
Gold was trading at $1,928.01 an ounce midday Thursday, down from $1,934.80 at the London equities close on Wednesday.
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