A suggestion by the US that Russian oil will be the next target of the Western sanctions regime was enough to send crude prices to near a 14-year high and stock markets tumbling on Monday.
The FTSE 100 index in London was down 93.94 points, or 1.3%, at 6,893.20 midday Monday. The mid-cap FTSE 250 index was down 600.47 points, or 3.1%, at 18,787.21. The AIM All-Share index was down 24.80 points, or 2.6%, at 946.15.
The Cboe UK 100 index was down 1.5% at 687.08. The Cboe 250 was down 3.5% at 16,477.09, and the Cboe Small Companies down 1.9% at 13,875.86.
In mainland Europe, both CAC 40 in Paris was down 2.6% and the DAX 40 in Frankfurt was 3.1% lower.
‘The new week has started with a bang, with stocks tumbling and crude oil soaring at the Asian open overnight as traders woke up to weekend news that the US and its allies are discussing a coordinated embargo on Russian crude supplies, while trying to prevent a global supply shock,’ ThinkMarkets analyst Fawad Razaqzada said.
Brent oil was quoted at $125.36 a barrel around midday Monday, up almost 10% from $114.52 late Friday but slipping after earlier having neared a 14-year high of $140.
Shell and BP followed oil prices higher, rising 7.0% and 3.2%, respectively.
Europe and UK natural gas prices soared to record highs on fresh supply fears after the US proposed an embargo on Russian crude oil.
Europe gas reference Dutch TTF rocketed more than 60% to reach an all-time peak of €345 per megawatt hour and UK gas hit a record high of 800 pence per therm.
US Secretary of State Antony Blinken said the White House and allies were in talks about banning oil imports from Russia following its invasion of Ukraine.
‘The price explosion has been sparked by the fact that the West is considering banning Russian oil imports in response to the war in Ukraine,’ said Commerzbank analyst Carsten Fritsch. ‘There is speculation that Europe might decide of its own accord to stop Russian gas imports. So far, gas is still flowing normally.’
Commented Goldman Sachs: ‘While the headline of potential further US sanctions are likely to support prices, such a move would likely have negligible impacts on global crude and products markets.’
The investment bank noted the US only imports a little over 400,000 barrels of oil per day from Russia, down from a peak of 770,000 in May-June last year. ‘Volumes this small are well within the market’s ability to redirect flows and as such we would expect minimal overall impact on crude fundamentals,’ it said.
Gold stood at $1,990.10 an ounce midday Monday, up from $1,961.27 late Friday, with aluminium and copper prices at fresh record highs on Monday.
As a result of the red-hot commodities prices, London’s big miners were bucking the overall downtrend. Anglo American advanced 6.0%, Fresnillo 2.1%, Glencore 4.1%, Antofagasta 5.7% and Rio Tinto 3.6%.
Defence firm BAE Systems also was among the winners on Monday, rising 6.9%. It completed its acquisition of Bohemia Interactive Simulations for $200 million.
The London-based aerospace company said the acquisition will expand its modelling and simulation capabilities in a ‘growing market for global military training’. It will join BAE System’s Intelligence & Security sector.
Sitting atop London mid-cap stocks, Clarkson rose 5.9%. The shipping services firm swung to a profit in 2021 and upped its shareholder payout, following a recovery in the shipping markets.
For 2021, it recorded a pretax profit of £69.1 million versus a £16.4 million loss in 2020. Revenue increased 24% to £443.3 million from £358.2 million.
Clarkson upped its annual dividend to 84 pence from 79p a year prior.
Chief Executive Andi Case said: ‘We are positive about the future of the shipping industry. The outlook for Clarksons remains strong, and we believe the business will continue to benefit from its market-leading position.’
Clarkson ended 2021 with a forward order book of $165 million, up from $116 million at the same point a year earlier.
At the other end of the FTSE 250, Oxford Instruments fell 24% after Spectris ended discussions over the proposed £1.8 billion takeover of Oxford, due to market uncertainty following the invasion of Ukraine.
A takeover proposal from FTSE 250-listed precision instruments supplier Spectris had been confirmed by fellow London midcap Oxford Instruments last Monday, with a deadline of March 28 for a firm offer or withdrawal.
However, Spectris now has said that, in light of the ‘significant uncertainty in global economic conditions’ as a result of the war in Ukraine, the potential takeover is no longer in the interests of its shareholders. Discussions between the parties have now been terminated.
Spectris was up 3.3%.
On AIM in London, CareTech was up 9.6%. It may receive a takeover offer from shareholder Sheikh Holdings Group. The family office of Haroon and Farouq Sheikh confirmed a press report it is in the ‘early stages of forming a consortium’ to potentially make a bid to buy CareTech.
The company has not yet been approached, it noted.
New York was pointed to a lower open on Monday. The Dow Jones Industrial Average and the S&P 500 were both down 1.5% and the Nasdaq Composite was seen opening 1.6% lower.
The pound was quoted at $1.3155 midday Monday, down from $1.3215 at the London equities close Friday.
The euro was priced at $1.0839, down from $1.0915. Against the yen, the dollar was trading at JP¥115.08, up against JP¥114.76.
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