Europe midday: Shares flatline as BoE raises rates, Russia bombs Ukraine theatre

by | Mar 17, 2022

European shares slipped towards the flatline on Thursday Russian shelling of Ukraine overshadowed peace talks and UK interest rates were hiked again to combat rampant inflation.

The pan-European Stoxx 600 index was flat after stronger gains in the morning, with regional bourses mixed. Asian shares were up again after China’s promise of stimulus measures to support its economy. Hong Kong’s Hang Seng index surged 7%.

In London, the Bank of England raised interest rates by 0.25 points to 0.75%, with official borrowing costs back to pre-Covid levels as the Bank’s monetary policy committee decided rising inflationary pressure required tougher policy despite the war in Ukraine hitting the economy on top of the cost of living crisis faced by Britons due to Brexit and the pandemic.

The quarter-point rise was the first time the Bank has raised interest rates at three successive meetings since 1997, the year it was given operational independence by the newly-elected Labour government of Tony Blair. The UK’s FTSE 100 index was up 0.36% on the latest news.

On the war front, the death toll of Ukrainian citizens continued to mount after air strikes in the besieged city of Mariupol hit a theatre where hundreds of people were believed to have been sheltering and a swimming pool where pregnant women and young children had gathered.

The US Federal Reserve overnight increased rates by a quarter point, as expected, and indicated rises at every meeting for the remainder of this year.

Commodities were in focus again, with the London Metal Exchange’s (LME) three-month nickel contract hitting its lower trading limit of 8% when it opened on Thursday as traders sold on expectations of falling prices.

A wild spike in prices for the metal used to make stainless steel and electric vehicle batteries left traders facing billions of dollars in losses saw the LME suspending trades on Wednesday.

Oil prices were also showing volatility, whipsawing around the $100 level as supply disruption fears after Russia’s decision to wage war on Ukraine pushed Brent crude briefly to $139 a barrel.

Prices rose again overnight after the International Energy Agency said markets could lose three million barrels per day of Russian crude from April and UK Prime Minister Boris Johnson failed to persuade Saudi Arabia and the United Arab Emirates to lift production.

In equity news, shares in Germany’s Thyssenkrupp fell 10% after the company suspended its 2021/22 forecast for free cash flow before mergers and acquisitions due to the Ukraine crisis, and said it was unclear if it would still be able to spin off its steel division.

Ocado shares fell as the online grocer said retail revenue fell in the first quarter of 2022 and warned about uncertainty caused by the rising cost of living.

Deliveroo shares were up 6% despite a wider annual loss as spending on marketing and technology more than offset higher revenue at the food delivery group.

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