Equities in London crumbled on Monday as investors monitor the spiralling Russia-Ukraine situation with increasing concern, fleeing risk assets in favour of safe havens, such as gold and the Japanese yen.
In London’s FTSE 100, which gave up a large chunk of its year-to-date gain, only a handful of stocks managed to sneak into positive territory by midday. The blue-chip index was on course to notch its worst session in three weeks.
The FTSE 100 index was down 146 points, or 1.9%, at 7,515.02 midday Monday. The mid-cap FTSE 250 index was down 505.50 points, or 2.3%, at 21,543.21. The AIM All-Share index was down 20.42 points, or 1.9%, at 1,063.85.
The Cboe UK 100 index was down 1.9% at 746.02. The Cboe 250 was down 2.4% at 19,275.47, and the Cboe Small Companies down 1.3% at 15,489.05.
In mainland Europe, the CAC 40 in Paris plunged 3.4%, while the DAX 40 in Frankfurt was down 3.2%.
‘The prospect of war is rarely good for stock markets, and so the new trading week has begun on a bad note across Europe and Asia as investors fear the alarm clock is about to sound on a physical battle between Russia and Ukraine,’ AJ Bell analyst Danni Hewson commented.
‘Should Russia go to war with Ukraine, there is no telling how long the battle will last, and the damage wrought on the stock market. Uncertainty is terrible for investors, and it will take real nerve to stay invested through war, particularly as news headlines are likely to cause panic on the markets. Yet patience has historically been rewarded as time in the markets is better than timing the markets.’
Washington reaffirmed its warning Sunday that Russia could invade Ukraine at any moment, and German Chancellor Olaf Scholz prepared to visit both countries in a bid to head off a crisis that Berlin said had reached a 'critical' point.
US national security advisor Jake Sullivan issued a grim assessment that an invasion that could begin ‘any day now’ would likely start with ‘a significant barrage of missiles and bomb attacks.’
The situation boosted oil prices. A barrel of Brent crude fetched $94.10 midday Monday, up from $93.16 late Friday. Brent reached an intraday high of $96.05 a barrel, its best level since October 2014.
Average UK petrol prices have surpassed 148p for the first time, according to new figures.
The AA said that petrol jumped to 148.02p per litre on Sunday, rising above the previous record high of 147.72p from November 21 last year.
Rising oil prices have contributed to sharp accelerations in inflation over recent months. Fast consumer price rises have prompted central banks to take action and normalise monetary policy, something which has also rattled markets so far this year.
The Federal Reserve is widely expected to lift interest rates at its next meeting in March.
US stock market futures were lower on Monday, following hefty equity price declines at the end of last week. The Dow Jones Industrial was called down 0.7%, the S&P 500 down 0.8% and the Nasdaq Composite 1% lower.
In contrast, safe haven assets were on the up. The dollar advanced against both the pound and euro, but lost ground on the Japanese yen. Gold prices ticked up, meanwhile.
The pound was quoted at $1.3508 midday Monday, down from $1.3601 on Friday. Sterling fell to $1.3495 earlier on Monday, a two-week low. The euro fetched $1.1300, down from $1.1406. Against the yen, the buck fell to ¥115.19 from ¥115.89.
Gold was quoted at $1,855.98 an ounce midday Monday, up from $1,834.21 on Friday. London-listed gold miner Fresnillo was 5.1% higher, one of just five blue-chip stocks in the green.
ActivTrades analyst Ricardo Evangelista commented: ‘Gold gains are somehow limited by the other dominant narrative of the moment, the threat of inflation and the pace and timing of the US Federal Reserve’s monetary tightening.’
‘Investors remain alert to the possibility that the Fed is about to move decisively, and hike rates quicker and more often than previously expected. Against such a backdrop, the dollar continues to gain ground over other major currencies, limiting gold gains due to the inverted correlation between the two assets.’
The Russian ruble depreciated in value, meanwhile. The dollar fetched 77.03 rubles at midday London time, up sharply from 75.05 at the same time on Friday. The dollar hit a high of 78.17 earlier on Monday.
The MOEX Russia Index in Moscow, meanwhile, was 3.3% lower. Its components include energy company Gazprom and Russian flag carrier Aeroflot.
Back in London, steel maker Evraz, which largely operates in Russia, plunged 31% with heightened tensions between Russia and Ukraine and the stock going ex-dividend for its coal division demerger. Russian oligarch Roman Abramovich has roughly a 29% stake in the company.
Travel stocks were also weaker. British Airways parent International Consolidated Airlines Group lost 6.2% and Wizz Air fell 9.1%.
Away from geopolitical tensions, shares in home shopping company Studio Retail were suspended.
The Lancashire, England-based company has appointed administrators after it failed to reach a deal for a £25 million funding bid.
Mike Ashley’s Frasers Group, which owns Sports Direct, has just shy of a 30% stake in Studio Retail. Frasers shares were 4.8% lower midday Monday.
On the up, however, was Audioboom. The podcast producer’s shares surged 12.5% to £19.80, after news reports that Amazon and Spotify are both considering making bids to acquire the company.
According to people close to the situation, Amazon has been in touch with investment bankers at JPMorgan on its interest in Audioboom. Should an approach be made by either company, it is expected to be pitched at a significant premium to Audioboom’s £17.60 closing price on Friday.
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