Russia's move to cut gas supplies to Germany has undermined market sentiment at the start of the new week, though trading on Monday is likely to be limited due to a holiday in the US.
On Friday, Gazprom said that a gas pipeline to Germany - which was due to reopen at the weekend - would remain shut until a turbine is repaired, cutting off indefinitely an energy supply route to Europe.
In a statement, Gazprom indicated it had discovered ‘oil leaks’ in a turbine during a planned three-day maintenance operation.
Gazprom added that ‘until it is repaired...the transport of gas via Nord Stream is completely suspended’.
The FTSE 100 index was down 47.20 points, or 0.6%, at 7,233.99 early Monday. The mid-cap FTSE 250 index was down 168.98 points, or 0.9%, at 18,684.24. The AIM All-Share index was down 3.02 points, or 0.4%, at 863.17.
The Cboe UK 100 index was down 0.7% at 722.77. The Cboe 250 was down 0.9% at 16,016.08, and the Cboe Small Companies down 0.3% at 13,692.12.
In mainland Europe, the CAC 40 in Paris was down 2.0% while the DAX 40 in Frankfurt was 2.6% lower.
Brent oil was trading at $95.36 a barrel, higher than $94.00 late Friday. Shell and BP were benefiting from the increased price, adding 0.7% and 0.9%, respectively.
Faced with global recession fears, the OPEC+ countries are expected to agree a modest increase in oil production at a meeting on Monday, though with some experts even forecasting a cut to support prices.
The 13 members of the Organization of the Petroleum Exporting Countries cartel, led by Saudi Arabia, and their 10 partners, led by Russia, are meeting to adjust their quotas for October. Talks are due to start at 1200 BST.
The energy troubles brewing in Europe sent the dollar higher.
Ipek Ozkardeskaya, senior analyst at Swissquote Bank, said: ‘This week is important for euro traders, as the European Central Bank is expected to announce a sizeable rate hike at its Thursday's policy meeting.
‘Many traders now expect a 75bp rate hike from the ECB this week, while some continue bet on a 50bp hike, on the idea that the ECB cannot carry on jumbo rate hikes, when the eurozone is threatened by deepening energy crisis, and a sharp fall in economic activity. But the eurozone is also struggling with skyrocketing inflation, argue the hawks.’
The euro traded at $0.9900 early Monday, down from $1.0027 late Friday.
Sterling was quoted at $1.1463 early Monday, sharply down from $1.1575 at the London equities close on Friday.
The Conservative leadership election finishes up on Monday. Liz Truss remains the favourite to succeed Boris Johnson and take charge as UK prime minister, as the country battles a spiralling cost-of-living crisis.
The result will be announced at 1230 BST, after Foreign Minister Truss and her rival, former finance minister Rishi Sunak, spent the summer rallying support among the Conservative Party members who cast the final vote.
In London, the FTSE 100 was topped by its miners. Glencore was up 3.1%, Rio Tinto 2.3%, Anglo American 2.1%, Antofagasta 2.0%.
At the other end of the blue-chip index, Dechra Pharmaceuticals shed 7.0%, the worst performer.
The veterinary products firm said annual growth was driven by an improved performance across all its key markets, prompting a double-digit dividend rise.
In the financial year that ended June 30, Dechra reported pretax profit of £77.6 million, up from £74.0 million the year prior. Revenue increased to £681.8 million from £608.0 million.
Its total dividend was raised to 44.89p from 40.50p.
It said the veterinary pharmaceutical market, particularly in the Companion Animal Products - which represents 75% of total revenue - is ‘resilient and in growth’.
In the midcaps, Tyman was down 7.9%, after Berenberg cut the stock to 'hold' from 'buy'.
Aston Martin was down 6.5%.
The luxury carmaker confirmed its plan for £575.8 million 4-for-1 rights issue.
It noted Saudi Arabia's sovereign wealth fund, the Public Investment Fund, Lawrence Stroll's Yew Tree Consortium, and fellow car maker Mercedes-Benz Group are taking up their full entitlements, amounting to 45% of the total rights issue.
Aston will issue 559 million new shares as part of rights issue. The fully committed and underwritten raise is part of a larger £653.8 million equity raise, announced back in July.
Countryside Partnerships gained 5.7% after Vistry Group agreed to a merger with the housebuilder, with Vistry offering 0.255 of a share and 60 pence cash for each Countryside share.
The offer represents 249p per Countryside share, valuing it at about £1.25 billion. Countryside shareholders will own about 37% of enlarged firm.
‘The combination would create one of the country's leading homebuilders, comprising a top tier housebuilder and a leading partnerships business, with capability across all housing tenures, and delivering much needed affordable housing,’ Vistry said.
Vistry Chief Executive Greg Fitzgerald said the proposed merger has ‘highly compelling strategic rationale’.
Countryside board unanimously recommends deal.
Vistry was down 0.8%.
In Asia on Friday, the Japanese Nikkei 225 index closed down 0.1%. In China, the Shanghai Composite ended up 0.4%, while the Hang Seng index in Hong Kong was 1.1% lower in late trade. The S&P/ASX 200 closed up 0.3%.
China's services sector reported a slowdown in expansion in August, as reduced Covid-19 restrictions allowed for a continued rise in business activity, albeit at a softer rate.
Survey results from Caixin and S&P Global showed that the seasonally adjusted headline business activity index stood at 55.0 in August, dipping from 55.5 in July, remaining above neutral levels of 50.0.
Neighbouring Japan's services sector continued to weaken in August, falling into decline as a recent rise in Covid-19 infections took its toll on customer demand and new business.
The au Jibun Bank Japan services business activity index dropped to 49.5 index points in August from 50.3 points in July, falling below the neutral level of 50.0, and marking the first decline since March.
The figure was still above market expectations of 49.2 points, according to FXStreet.
Against the yen, the dollar was quoted at JP¥140.52, up from JP¥140.05.
Gold was quoted at $1,708.60 an ounce early Monday, down from $1,713.90 on late Friday.
Still to come Monday, there are services purchasing manager's index readings, with France, Germany, the eurozone, and the UK in the morning. There also are eurozone retail sales at 1000 BST.
The US services PMI print will be on Tuesday, as financial markets are closed on Monday for the Labour Day holiday.
‘For the week ahead the US data calendar is light, but we have several Fed speakers including Chair Powell on Thursday,’ noted INGk. ‘Equally the G10 has several big central bank meetings including the European Central Bank, Bank of Canada and Reserve Bank of Australia.’
The bank added: ‘Expect European currencies to continue under-performing, with fiscal support packages unlikely to reverse recent trends.’
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