Oil and gold prices rose, while stock markets dropped, as Western nations prepared to impose immediate economic sanctions on Russia for moving troops into a separatist region of Ukraine.
Brent crude headed toward $100 a barrel, lifting oil producers Shell and BP.
EU foreign ministers on Tuesday will adopt sanctions against Russia over its recognition of Ukrainian separatist regions and further deployment of troops on its neighbour’s territory, the bloc’s foreign policy chief Josep Borrell said.
‘Of course our response will be in the form of sanctions, whose extent the ministers will decide...I’ m sure there will be a unanimous decision‘ required for the measures, Borrell told reporters in Paris, adding that he expected the move ‘this afternoon.’
The FTSE 100 index was down 57.06 points, or 0.8%, at 7,427.27 early Tuesday. The mid-cap FTSE 250 index was down 250.98 points, or 1.1%, at 20,846.21. The AIM All-Share index was down 13.23 points, or 1.3%, at 1,028.30.
The Cboe UK 100 index was down 0.8% at 737.20. The Cboe 250 was down 1.5% at 18,600.87, and the Cboe Small Companies down 0.7% at 15,17.21.
In mainland Europe, the CAC 40 in Paris was down 1.7%, while the DAX 40 in Frankfurt was 2.4% lower.
In the FTSE 100, Smith & Nephew was the best performer among a handful of stocks in the green, up 1.8%. The medical devices maker reported a rise in annual revenue and launched a share buyback programme.
For 2021, Smith & Nephew posted a trading profit of $936 million, up 37% from $683 million in 2020 on revenue of $5.21 billion, up 14% from $4.56 billion. Pre-tax profit was $586 million, more than doubled from $246 million.
Smith & Nephew declared a final dividend of $0.231 cents. It also made a new commitment to return surplus cash to shareholders in the form of a regular annual buyback, expected to be between $250 million and $300 million in 2022.
Oil majors Shell and BP were up 1.4% and 0.7% respectively, tracking spot oil prices higher.
Brent oil was trading at $97.73 a barrel Tuesday morning, up sharply from $95.19 late Monday.
‘The market puts a premium on oil due to the risk that Russian oil exports will be hit by sanctions,’ Danske Bank commented. ‘However, oil is also following the broad ‘super cycle’ like trend higher in commodity prices, which owes to strong global demand. Hence, even if the tensions should de-escalate, oil prices will not necessarily drop much.‘
InterContinental Hotels was up 0.8% after the Holiday Inn and Crowne Plaza parent said trading improved significantly in 2021 as vaccination rates rose and travel restrictions were lifted around the world.
For 2021, IHG swung to a pre-tax profit of $361 million from a loss of $280 million in 2020 on total revenue that was up 21% to $2.91 billion from $2.39 billion.
IHG declared a total dividend $0.859 for 2021, having paid out nothing the year before.
At the other end of the large-caps, Hargreaves Lansdown was by far the worst performer, down 21%, as the fund supermarket unveiled plans to spend £175 million in a strategic revamp and interim profit dropped.
For the six months ended December 31, pre-tax profit fell 20% to £151.2 million from £188.4 million the year before as revenue was down 2.8% to £291.1 million from £299.5 million.
First half net new business was down 28% to £2.32 billion from £3.24 billion the year before.
Looking ahead, the Bristol-based firm said it will ramp up investment in order to deliver on a ‘significant growth opportunity’ in the wealth space, as it competes with FTSE 250 constituent AJ Bell and with interactive investor, which is set to be acquired by FTSE 100-listed Abrdn.
To do so, Hargreaves Lansdown plans to invest in its platform, ‘notably on technology spend and key capabilities’ over the next five years. The stockbroker has initiated a programme of strategic investment of £175 million over five years, starting with £35 million this year to June 2022, plus £10 million of dual system costs.
‘Earnings reduction for this year and next is likely to be 10% to 15%. While this is an amazing business, still taking share, the cost of reacting to competitive threats is significant, and the profitability and growth outcome not above current expectations,’ said Shore Capital analyst Ben Williams.
AJ Bell was down 2%, while Abrdn was down 4%.
Russia-focused stocks Polymetal International and Evraz were down 4.7% and 2.6% respectively as tensions with Ukraine escalate. Mid-cap gold miner Petropavlovsk was the biggest faller, down 14%.
FTSE 250-listed John Wood was down 11% after the consulting and engineering firm warned it will take a $100 million exceptional charge against 2021 results, related to Aegis Poland, a legacy Amec Foster Wheeler project.
The Aberdeen, Scotland-based firm said $20 million of that will be in cash to complete the project, with the rest being non-cash charges for ‘expected recovery from the customer and the legal costs needed to achieve such recovery.’
John Wood will delay its annual results from the originally scheduled March 8 in order to allow for the audit process related to the project. However, the company said that its underlying results for 2021 and outlook for 2022 remain unchanged from the trading update it provided in January.
In Asia on Tuesday, the Japanese Nikkei 225 index closed down 1.7%. In China, the Shanghai Composite ended down 1.0%. The Hang Seng index in Hong Kong lost 2.7%. The S&P/ASX 200 in Sydney closed 1.0% lower.
The pound was quoted at $1.3570 early Tuesday, down from $1.3607 at the London equities close Monday.
The euro was priced at $1.1305, down from $1.1338. Against the safe-haven yen, the dollar was trading at ¥114.80 in London, marginally lower against ¥114.83.
Gold stood at $1,909.80 an ounce, advancing from $1,896.42 late Monday amid a flight to safety.
Tuesday’ s economic calendar has the German Ifo index at 0900 GMT and a US PMI at 14.45 GMT. Financial markets in the US will re-open on Tuesday after Monday’s Presidents Day holiday.
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