The mood was optimistic at the start of the week as the latest round of talks between Russia and Ukraine got underway, with stocks in mainland Europe charging ahead.
However, London’s FTSE 100 lagged behind, up a meagre 0.3% at midday with its heavyweight mining sector holding the blue-chip index back. This was after a spike in Covid cases in China, with authorities reporting 2,300 new virus cases nationwide on Monday and almost 3,400 a day earlier, the highest daily figure in two years.
Seventeen million people in the Chinese tech hub of Shenzhen began their first full day under lockdown Monday and in Shanghai, China’s largest city, residential areas and offices in some neighbourhoods remained sealed off as city authorities try to avoid a full lockdown.
The FTSE 100 index was up 17.87 points, or 0.3%, at 7,173.51. The mid-cap FTSE 250 index was up 205.45 points, or 1.0%, at 20,412.06. The AIM All-Share index was up 3.35 points, or 0.3%, at 998.59.
The Cboe UK 100 index was up 0.3% at 713.25. The Cboe 250 was up 1.3% at 18,014.53, and the Cboe Small Companies down 0.1% at 14,458.92.
In mainland Europe, the CAC 40 stock index in Paris rose 1.7% and the DAX 40 in Frankfurt was 2.8% higher.
ActivTrades analyst Pierre Veyret said: ‘Stocks traded higher in Europe on Monday, alongside US futures, as investors bet on an improving geopolitical context at the beginning of a new round of diplomatic talks. Market volatility may not be over as war continues for now, with Russia still targeting military facilities across Ukraine.
‘In addition, the prospect of a military assistance from China, recently raised by US intel, may bring further shock to stock markets. However, market sentiment improved over the weekend as both Russia and Ukraine are set to resume discussions via video conference, in a bid to end the war following recent progress.’
A fourth round of talks between Moscow and Kyiv got underway Monday, a senior Ukrainian negotiator said, amid mutual claims of shelling and civilian deaths earlier in the day.
Kyiv’s lead negotiator and presidential aide Mikhailo Podolyak posted a picture on Twitter of video-conference talks with Russian officials describing the negotiations as ‘hard’, saying that the two sides were outlining their ‘specific positions’.
The talks come as Russia has asked China for military and economic aid for its war in Ukraine, US media reported Sunday, hours after the White House warned Beijing would face severe ‘consequences’ if it helps Moscow evade sanctions.
Beijing refused to directly address the reports, instead accusing Washington of maliciously spreading ‘disinformation’ over China’s role in the Ukraine war.
New York was pointed to a mostly higher start on Monday. The Dow Jones Industrial Average was called up 0.1%, the S&P 500 up 0.5% and the Nasdaq Composite flat, based on futures trading.
The policy-setting Federal Open Market Committee holds its two-day policy meeting on Tuesday, with an announcement set for Wednesday when it is poised to begin raising the benchmark lending rate that was cut to zero at the start of the Covid-19 pandemic in March 2020.
In the FTSE 100, Phoenix Group was up 1.0% after the insurer lifted its dividend and revealed a new payout policy after an ‘outstanding’ 2021.
For 2021, Phoenix generated an operating profit of £1.23 billion, up from £1.20 billion in 2020, reflecting the contribution of a full year of profit from its ReAssure business and increased bulk purchase annuity new business in the period.
The London-based insurance services provider reported record cash generation of £1.72 billion in 2021, exceeding its £1.5 billion to £1.6 billion target range for the year and just ahead of the £1.71 billion generated in 2020.
Phoenix declared a final dividend of 24.8 pence, up 3% on a year before in its inaugural organic dividend increase. This took the year’s dividend to to 48.9p, having paid a total dividend of 47.5p in 2020.
At the other end of the large-caps, Rio Tinto was down 3.6%, after the Anglo-Australian miner proposed to buy the 49% of Canada’s Turquoise Hill it does not already own.
Rio said Turquoise Hill minority shareholders would receive C$34 in cash per Turquoise Hill share, representing a premium of 32% to Turquoise Hill’s last closing share price on the Toronto Stock Exchange.
The offer would value the Turquoise Hill minority share capital at $2.7 billion. The offer follows the agreement reached between Rio Tinto, Turquoise Hill and the government of Mongolia to move the Oyu Tolgoi project forward, reset the relationship between the partners and approve commencement of underground operations.
Rio’s decline was part of a broader mover lower by miners on Monday, with Anglo American and Glencore both down 3.8% amid worries over further Covid curbs in China.
Oil majors BP and Shell were down 1.8% and 1.5% respectively, tracking spot oil prices lower.
Brent oil was quoted at $107.21 a barrel on Monday at midday, down sharply from $111.92 late Friday.
Reckitt Benckiser was down 0.8% after Bernstein downgraded the household goods company to ‘underperform’ from ‘market perform’.
In the FTSE 250, China-focused investment trusts Fidelity China Special Situations and Schroder AsiaPacific Fund were the among worst performers, down 5.0% and 2.0% respectively, amid China’s Covid flare-up.
In China on Monday, the Shanghai Composite ended down 2.6%, while the Hang Seng index in Hong Kong finished down 5.0%. Elsewhere in Asia, the Japanese Nikkei 225 index closed up 0.6%. The S&P/ASX 200 in Sydney closed up 1.2%.
In the Chinese city of Shenzhen, public transport has been suspended and officials have told all residents to stay at home, with the lockdown set to last until March 20 while three rounds of mass testing are carried out. The move has led Foxconn, which is a key supplier for Apple and maker of iPhones, to halt operations in the city.
Apple shares were trading 1.6% lower pre-market in New York.
The news compounded problems for China’s tech industry, which has been under increasing pressure from Beijing’s regulatory crackdown on the private sector.
Elsewhere in London, Hostmore was down 10%. The hospitality firm narrowed its annual loss despite the year being impacted by Covid-19 and the subsequent restrictions.
In the year ended January 2, the Edinburgh-based company reported a narrowed pretax loss of £1.6 million in 2021, slimmed from a loss of £20.2 million the previous year.
The Fridays casual dining chain operator saw revenue rise 23% to £159 million from £129.1 million year-on-year, with like-for-like revenue 4% ahead of the financial 2019 comparable since the gradual lifting of restrictions in May despite the impact of the Omicron virus variant in the December trading period.
‘Whilst we recognise the significance of the evolving impact that the Ukraine crisis may have on consumer demand and inflation, our stronger balance sheet and liquidity nevertheless place us in the enviable position of looking forward to the opportunities ahead,’ said Chief Executive Officer Robert Cook.
The dollar was higher across the board. The pound was quoted at $1.3025 at midday on Monday, down from $1.3075 at the London equities close Friday.
The euro was priced at $1.0952, soft from $1.0955. Against the yen, the dollar was trading at JP¥118.00, up sharply from JP¥117.05.
‘GBP/USD is under continued pressure this morning as the US dollar continues to strengthen from safe haven flows on the back of the ongoing conflict in Ukraine. Traditionally, investors tend to move towards the US dollar during uncertain times,’ explained analysts at OFX.
Gold stood at $1,956.48 an ounce, lower against $1,982.75 late Friday.
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