LONDON MARKET MIDDAY: Stocks sink on fears of Ukraine conflict

(Alliance News) - Stock prices in London were sharply lower at midday on Monday amid market unease over the standoff on the border of Ukraine as the US ordered families of Ukraine embassy staff to leave.

However, Ukraine said it was "premature" of the US to evacuate the families of its diplomatic staff in Kyiv due to fears of a looming Russian invasion. "We consider such a step by the American side premature and a display of excessive caution," Ukrainian foreign ministry spokesman Oleg Nikolenko said in a statement.

The EU is not following the US in withdrawing its diplomats' families from Ukraine, top European diplomat Josep Borrell said, adding that there was no need to "dramatise" the situation while talks with Russia continue.

"We are not going to do the same thing because we don't know any specific reasons," Borrell said as he arrived for a meeting of EU foreign ministers which will include videolink participation by US Secretary of State Antony Blinken.

The West says Russia has been massing tens of thousands of troops on its border with Ukraine, along with an arsenal of tanks, fighting vehicles, artillery and missiles.

The Kremlin insists its forces are not there to invade and on Monday accused the US and NATO of ramping up tensions, after the Western military bloc said it was bolstering Europe's eastern defences.

Kremlin spokesman Dmitry Peskov said Washington and NATO were escalating tensions through "information hysteria" and "concrete actions," adding that the risk of an offensive by Ukrainian troops against pro-Russia separatists was "very high".

The FTSE 100 index was down 87.81 points, or 1.2%, at 7,406.32. The mid-cap FTSE 250 index was down 480.24 points, or 2.2%, at 21,782.40. The AIM All-Share index was down 35.20 points, or 3.1%, at 1,096.88.

The Cboe UK 100 index was down 1.0% at 736.17. The Cboe 250 was down 2.3% at 19,515.24 and the Cboe Small Companies down 2.2% at 15,294.49.

In mainland Europe, the CAC 40 stock index in Paris was down 1.7%, while the DAX 40 in Frankfurt was down 1.6%.

"Anyone hoping for a measure of calm on the markets after a testing period is likely to be disappointed as we start what could be another turbulent week," said AJ Bell investment director Russ Mould.

"The shifting market landscape is further complicated by the increasingly noisy sabre rattling by Russia on the Ukrainian border. Escalation to a full armed conflict is likely to prompt market volatility and potentially a further surge in energy prices - only adding to the current inflationary pressures," Mould added.

In the FTSE 100, Unilever was the best performer, up 5.8%. Trian Partners has built a stake in the Dove soap maker, turning up the pressure on the FTSE 100 company after its failed pursuit of GlaxoSmithKline's consumer health business, the Financial Times reported at the weekend.

Citing people familiar with the matter, the newspaper said Nelson Peltz's activist hedge fund had taken an unspecified position in the Unilever shares, adding to the challenges facing Chief Executive Officer Alan Jope.

The FT said people with knowledge of the stakebuilding did not provide details on its size or when precisely it began. Last week, Unilever said it would not increase its offer for Glaxo's Consumer Healthcare unit above GBP50 billion following three failed bids. Glaxo was up 0.7%.

Hargreaves Lansdown was up 3.0% after Bank of America upgraded the fund supermarket to Buy from Neutral.

At the other end of the large-caps, Barratt Developments was down 6.6%. Jefferies downgraded the housebuilder to Hold from Buy.

Pearson was down 5.5% after UBS cut the education publisher to Sell from Neutral.

In the FTSE 250, Ferrexpo was down 7.5% after Peel Hunt downgraded the iron pellets producer to Hold from Buy. The Ukraine-focused stock also was hurt by the country's tensions with Russia.

Elsewhere in London, De La Rue was down 23%. The banknote printer warned that annual profit will miss market expectations due to significant pressure from the extended Covid-19 pandemic.

For the financial year ending March 26, De La Rue expects adjusted operating profit to come between GBP36 million and GBP40 million, flat on GBP38.1 million in the prior year but below market expectations of GBP45 million to GBP47 million.

In addition, the company is dealing with higher commodity and energy costs and with supply chain shortages in chips and other raw materials.

The pound was quoted at USD1.3497 at midday on Monday, lower from USD1.3550 at the London equities close Friday, following disappointing PMI data from the UK.

UK private sector growth slowed in January as the Omicron variant of Covid-19 continued to weigh on customer-facing parts of the economy.

The IHS Markit-CIPS UK services purchasing managers' index reading was 53.3 points in January, down slightly from 53.6 in December. The flash print remained above the 50.0 neutral mark but missed the market forecast, cited by FXStreet, of 55.0. January's reading was also the lowest in 11 months.

The UK manufacturing PMI slipped to 56.9 points in January from 57.9 in December and missed the market estimate for the same score as registered in December.

The UK composite PMI, the combination of the two sectors, edged down to an 11-month low of 53.4 in January from 53.6 in December.

The euro was priced at USD1.1312, down from USD1.1343. Against the Japanese yen, the dollar was trading at JPY113.73, fractionally lower on JPY113.75.

On the continent, private sector growth in the eurozone slowed for a second successive month in January, preliminary survey results from IHS Markit showed.

The eurozone flash composite PMI slid to 52.4 points in January from 53.3 in December - hitting an 11-month low. The flash services PMI activity index declined to 51.2 points from 53.1, while the manufacturing PMI improved to 59.0 from 58.0.

Brent oil was quoted at USD87.87 a barrel on Monday at midday, up from USD87.74 late Friday. Gold stood at USD1,837.30 an ounce, higher against USD1,833.20.

New York was called sharply lower as the negative start for US equities in 2022 looks set to continue with the US Federal Reserve's first policy meeting of the year getting underway on Tuesday.

The Dow Jones Industrial Average was called down 1.5%, the S&P 500 down 2.1%, and the Nasdaq Composite down 3.2%, based on futures trading.

"Last week's important bearish corrections on most benchmarks can be seen as a sign the hawkish switch from the Fed was already being priced in. That said, Fed Chair Jerome Powell's words will be cautiously analysed in order to get more clues about the schedule and pace of incoming rates hikes and balance sheet reductions, which is likely to spark increased volatility towards riskier assets," said Pierre Veyret, technical analyst at ActivTrades.

Earnings season in New York continues this week with high-profile names Microsoft, Tesla and Apple reporting on Tuesday, Wednesday and Thursday, respectively.

By Arvind Bhunjun; arvindbhunjun@alliancenews.com

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