Bargain hunting on Wednesday was giving share prices a reprieve from their downward spiral over the past month, but further market volatility may be just around the corner as Russia shows no signs of letting up its assault on Ukraine.
‘For now, markets are relieved by the fact we haven't had any fresh bearish news since yesterday's announcement of a ban in oil imports from Russia,’ ThinkMarkets analyst Fawad Razaqzada said.
The US and UK on Tuesday moved to halt imports of Russian crude oil. Rocketing commodities prices have fuelled fears that the fragile global recovery from Covid-19 will be replaced by a period of stagflation, in which inflation surges and economies flatline or contract.
‘The markets were severely oversold, and any piece of good news would have always been amplified in terms of market reaction, which is what we have seen so far today. Also, let's not forget that this is also typical of a bear market when you sometimes see multiple percentage point gains in a short period of time as the shorts are squeezed, before the rally runs out of steam and the downward trend resumes,’ Razaqzada added.
The FTSE 100 index was up 95.25 points, or 1.4%, at 7,059.31 midday Wednesday. The mid-cap FTSE 250 index was up 558.02 points, or 2.9%, at 19,775.64. The AIM All-Share index was up 12.91 points, or 1.3%, at 976.16.
The Cboe UK 100 index was up 1.2% at 702.91. The Cboe 250 was up 2.8% at 17,402.85, and the Cboe Small Companies up 1.2% at 14,317.23.
Brent oil was quoted at $124.66 a barrel on Wednesday around midday in London, slipping from $132.65 late Tuesday, though still elevated.
Gold stood at $2,013.80 an ounce midday Wednesday, down from $2,056.80 late Tuesday.
Downtrodden travel stocks were finding takers, as were shares with Russia ties.
British Airways-owner International Consolidated Airlines was up 7.3% around midday, and jet engine maker Rolls-Royce advanced 3.4%. InterContinental Hotels rose 5.3% and Premier Inn-owner Whitbread by 5.5%.
Three Russian stocks that have suffered from the invasion - Evraz, Polymetal and Petropavlovsk - were up 28%, 43% and 20%, respectively.
On Wednesday, they said they do not consider themselves to be affected by Russian sanctions. The metals and mining companies said separately that they do not believe themselves to be an ‘entity owned by, or acting on behalf or at the direction of any persons connected with Russia’.
Also in the green, Prudential gained 3.9%. It reported ‘high-quality, resilient growth’ on Wednesday, though the Asia-focused insurer cautioned that Covid-19-related uncertainty in Hong Kong could continue.
For 2021, pretax profit slipped by 5.0% to $3.02 billion from $3.18 billion in 2020.
New business profit, however, rose by 13% to $2.53 billion from $2.20 billion. It was a revival of fortunes for the insurer, as its new business profit in Asia had fallen 38% in 2020.
European Embedded Value operating profit increased 4.1% to $3.54 billion from $3.40 billion.
Total revenue, net of reinsurance, dropped 27% to $26.50 billion from $36.25 billion.
Gross premiums earned rose 3.1% to $24.22 billion from $23.50 billion, but Prudential saw a marked drop in investment return of $3.49 billion from $13.76 billion.
Annual premium equivalents - a measure of the new policies sold - grew 8% to $4.19 billion from $3.81 billion. Present value of new business premiums rose 12% to $24.15 billion from $21.59 billion.
The company raised its annual payout by 7.0% to 17.23 cents per share from 16.10 cents. Its second interim payout alone was up 11% to 11.86 cents.
Electrocomponents advanced 9.9% as it expects annual revenue and adjusted operating profit margin to be ahead of market estimates, due to a strong trading performance.
In the nine weeks to March 4, revenue grew 22% on a like-for-like basis compared to a year ago. In the financial year to date - the company's financial year ends on March 31 - revenue is up 25%, also on a like-for-like basis.
Revenue in industrial product ranges, which represent around 75% of total revenue, also grew by 22% like-for-like in the recent nine weeks.
Stagecoach was 37% higher after it walked away from its all-share merger with larger UK peer National Express, opting for a cash offer instead.
National Express shares were up 10%.
The Perth, Scotland-based bus and train operator on Wednesday said its directors unanimously recommend a new £594.9 million cash offer from Pan-European Infrastructure III, an infrastructure fund managed and advised by DWS Infrastructure.
They no longer recommend a previously agreed all-share merger with Birmingham-based National Express. That deal, struck back in December, would have created a £1.9 billion market-cap public transport provider, though it was being reviewed by the UK Competition & Markets Authority.
DWS will offer Stagecoach shareholders 105 pence in cash, which is a 37% premium to its closing price on Tuesday. It was trading at 104.5p around midday on Wednesday.
Under the National Express merger offer, Stagecoach shareholders would have received 0.36 of new National Express share for each Stagecoach share. National Express noted the announcement and asked Stagecoach shareholders to take no action.
In mainland Europe, the CAC 40 in Paris was up 4.5% and the DAX 40 in Frankfurt up 4.9%.
New York was pointed to a higher open on Wednesday. The Dow Jones Industrial Average was called up 1.5%, the S&P 500 up 1.6% and the Nasdaq Composite up 2.1%.
The pound was quoted at $1.3152 midday Wednesday, firm on $1.3110 at the London equities close Tuesday.
The euro was priced at $1.0954, up from $1.0890. Against the yen, the dollar was trading at JP¥115.91, up from JP¥115.62.
The slight rebound by the euro comes ahead of a European Central Bank interest rate decision on Thursday. It may not last. ‘The bottom line is that if the ECB is not willing to hike rates this year to defend the euro, we will likely revise our forecasts [for the EUR/USD exchange rate] lower,’ commented Deutsche Bank.
Added Rabobank: ‘In view of the region's energy dependence on Russia and the potential for the conflict in Ukraine to drag on for months, the fog hanging over the outlook for Europe's economies is thicker than elsewhere. While today's better tone in equity pricing and FX is a welcome relief, it is far too soon to hope that the worst is over. We continue to see the EUR as vulnerable and see scope for further downside pressure in EUR/USD into the spring.
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