LONDON MARKET MIDDAY: Russia peace talk hopes trump China Covid woes

(Alliance News) - Stock prices in Europe climbed on Monday morning, with traders watching peace talks between Russia and Ukraine and shrugging off a fresh batch of Covid-19 lockdowns in China.

Authorities in China announced late on Sunday that the nation would carry out a two-phased lockdown of Shanghai, which has a population of around 25 million people, to perform mass testing. The news hit oil prices on Monday.

The FTSE 100 index was up 35.65 points, or 0.5%, at 7,519.00 midday Monday. The mid-cap FTSE 250 index rose 119.78 points, or 0.6%, to 21,075.99. The AIM All-Share index was up 1.26 points, 0.1%, at 1,037.28.

The Cboe UK 100 index was up 0.4% at 748.22. The Cboe 250 was up 0.5% at 18,605.33, and the Cboe Small Companies climbed 0.2% to 15,161.79.

In mainland Europe, the CAC 40 in Paris surged 1.5%, while the DAX 40 in Frankfurt jumped 1.6%.

Equity markets in New York were set for a tepid open. The Dow Jones Industrial Average and S&P 500 were called flat. The Nasdaq Composite was called 0.1% lower.

Brent oil was trading at USD115.72 a barrel midday Monday, down from USD120.08 late Friday.

"It almost feels like we've stepped back in time two years as lockdowns in China once again rock the markets," AJ Bell analyst Russ Mould commented.

"The two-day restrictions imposed in Shanghai are evidence that the pandemic is not yet over and inevitably, given the implications for global growth, have put oil prices under pressure. It was no surprise to see Asian stocks slump on the move as the region's dominant economy is once again threatened by the sceptre of Covid-19. The FTSE 100 is preferring to focus on renewed peace talks between Russia and Ukraine, amid hopes there can at least be a move towards an end to the fighting."

The Kremlin said talks between negotiators from Moscow and Kyiv have so far made no major breakthroughs on the conflict in Ukraine as the delegations prepare for a new round of talks in Istanbul.

"So far, we cannot state any significant achievements or breakthroughs," Kremlin spokesman Dmitry Peskov told reporters during his daily press briefing on Monday. "For now we cannot and will not speak of progress," Peskov added.

He said, however, that it was "important" that it had been decided to continue the talks in person. Peskov said that the delegations were arriving on Monday, but it was "unlikely" that talks will resume the same day.

Hargreaves Lansdown analyst Susannah Streeter commented: "Geopolitical tensions are still high in investors' minds, with negotiations set to re-start in Turkey to try and find a way to break through the impasse in the attempts to broker a ceasefire. But it's largely a wait and see approach traders are taking right now, with hopes lifting slightly with President Zelensky reported to be ready to discuss neutral status."

Zelensky had previously indicated he is "carefully" considering a Russian demand of Ukrainian "neutrality" and indicated he was willing to negotiate the future of Donbas at a later date.

The dollar rose on Monday, amid the tumultuous geopolitical situation, as well as a still-hawkish US central bank.

Sterling was quoted at USD1.3150 midday Monday in London, down from USD1.3185 at the London equities close on Friday.

The euro traded at USD1.0977 Monday, lower than USD1.0987 late Friday. Against the yen, the dollar rose to JPY123.93 versus JPY122.06.

Swissquote analyst Ipek Ozkardeskaya commented: "The US dollar begins the week on strong footage...on geopolitical tensions and the Fed hawks.

"The EURUSD slipped below the 1.10 mark on the back of a stronger US dollar, and there seems to be little that the ECB hawks could do against such a strong US dollar right now, even with the prospects that the rising inflation in Europe would force the ECB to become more aggressive on its tightening plans."

Gold prices weakened amid the stronger dollar. The precious metal was quoted at USD1,931.13 an ounce midday Monday in London, falling from USD1,955.60 late Friday.

In London, insurer Aviva topped the large-cap stocks, up 3.2% after UBS raised it to 'buy' from 'neutral'.

Barclays shares fell 2.7%. The bank warned of a GBP450 million hit, due to the over-issuance of structured notes and exchange traded notes.

Barclays said securities issued as part of its US shelf registration statement during a period of roughly one year exceeded the registered amount. Some purchasers now have a right of rescission, which would require Barclays to buy back the instruments at the original purchase price.

Barclays expects rescission losses of GBP450 million, net of tax. The charges will be reflected in its first quarter earnings. It also means its GBP1 billion buyback will now kick off in the second quarter.

"Barclays Bank PLC intends to file a new automatic shelf registration statement with the [US Securities & Exchange Commission] as soon as practicable. Barclays remains committed to its structured products business in the US," the company said.

It was a largely stronger day for the wider banking sector in London. Standard Chartered was up 2.1%, HSBC up 1.4% and NatWest up 1.8%.

Ownership of NatWest crossed an important threshold, as the UK government early Monday said it has reduced its stake below 50%, more than a decade after a taxpayer bailout during the financial crisis.

The Treasury said it sold 549.9 million shares back to NatWest in an off-market transaction at 220.5 pence per share, netting GBP1.21 billion.

The lender will cancel the shares that were purchased. After this, the government's stake, held via UK Government Investments Ltd, will be 48.1%, falling from 50.6%.

At one point, the government had an 81% stake in NatWest, following a GBP45.5 billion bailout by UK taxpayers.

Ted Baker shares fell 5.3% to 119.50 pence. The fashion retailer confirmed it received, and rejected, two unsolicited, non-binding takeover proposals from Sycamore Partners Management.

The first offer was for 130 pence per share on March 18, with a second coming four days later at 137.5p per share.

The company said it is "focused on delivering value for Ted Baker's shareholders well in excess of the price offered by Sycamore".

Ted Baker has a market capitalisation of GBP220.6 million.

Kingspan added 1.5% after HSBC lifted the building materials company to 'buy' from 'hold'.

By Eric Cunha; ericcunha@alliancenews.com

Copyright 2022 Alliance News Limited. All Rights Reserved.