London stocks closed deep in negative territory on Tuesday, having been unable to hold onto earlier gains as the crisis in Ukraine intensified.
The FTSE 100 ended the session down 1.72% at 7,330.20, and the FTSE 250 was 2.75% weaker at 20,500.64.
Sterling was in a mixed state, last trading 0.77% lower against the dollar at $1.3316, while it gained 0.28% on the euro to €1.1994.
“While the start to the day was rather shaky, there had been hopes that equities might continue to push higher even with the difficult backdrop of the war in Ukraine,” said IG chief market analyst Chris Beauchamp.
“But those hopes have evaporated – previously strong sectors such as banking are beginning to feel the pressure as investors reassess the outlook both for global GDP and tighter monetary policy, the latter exemplified by a pushing back of expectations around the first ECB rate hike.
“European markets continue to be the most affected, from a combination of closeness to Russia – both geographically and economically – and by the weaker earnings outlook here compared to the US.
“Kremlin pronouncements have become more strident today, further reducing the attractiveness of the continent’s equities.”
Russia’s invasion of Ukraine continued to shock and draw global condemnation on Tuesday, with the latest reports confirming that the TV Tower in Kyiv had been bombed.
Five people were reported dead by Ukrainian authorities, with television broadcasts reportedly off the air in the country’s capital.
Earlier in the afternoon, Russia warned residents of Kyiv to seek shelter, adding that it was preparing to launch rocket assaults on technology hubs, where it believes Ukrainian intelligence is working.
A long convoy of Russian vehicles continued to make slow progress towards Kyiv, although the London-based McKenzie Intelligence Services said it appeared it was being affected by vehicle breakdowns in several places.
At least 10 civilians were meanwhile killed in Ukraine’s second city Kharkiv earlier in the day, after a bombing of Freedom Square.
Earlier, it emerged that US-based payment card companies had cut off a number of Russian banks and financial institutions in response to sanctions imposed on the country by Washington.
Visa and Mastercard both confirmed that they had blocked a number of Russian organisations from their payment networks, effectively rendering both cards and terminals linked to the sanctioned companies useless.
Both companies also pledged to donate $2m (£1.49m) to humanitarian aid efforts related to Russia’s invasion of Ukraine, Reuters reported.
The US sanctions required both companies to block access to ‘specially designated nationals’, including the Central Bank of Russia and the country’s second-largest lender, VTB.
On home shores, UK manufacturing growth hit a seven-month high in February, underpinned by strong domestic demand, fewer raw material shortages and easing global supply chain pressures.
The IHS Markit/CIPS manufacturing purchasing managers’ index rose to a three-month high 58.0 from 57.3 in January, staying above the 50.0 mark that separates contraction from expansion for 21 consecutive months.
The survey found that faster growth of output, new orders and stocks of purchases helped to offset the impact of slower job creation and a lessening of supply chain disruptions.
“February saw a welcome uplift in manufacturing activity as the end of lockdown restrictions and more improvements in supply chain performance fuelled output growth momentum towards a seven-month high,” said Duncan Brock, group director at the Chartered Institute of Procurement and Supply.
“Domestic customers picked up the pace with stronger pipelines of new work, which was in stark contrast to another softening in overseas orders and the fifth drop in six months.
“Survey respondents cited Brexit obstacles and an overspill of pandemic supply issues acting as a brake on export opportunities with clients seeking alternative sources.
UK mortgage borrowing, meanwhile, rose to its highest since the end of the stamp duty holiday in January, but consumer credit only crept up as households stayed cautious, according to the Bank of England.
Mortgage borrowing increased to £5.9bn from £4bn a month earlier and mortgage approvals rose to 73,992 from 71,219, reflecting the busy UK housing market at the start of 2021.
Both figures were above the pre-pandemic average.
Approvals for house purchases, an indicator of future borrowing, rose to 74,000 – the highest since July 2021 and well ahead of the pre-Covid average of 66,700.
The borrowing figure was the highest since September when the Chancellor’s extended deadline for reduced stamp duty on property purchases ended.
Many commentators had expected property transactions to slow down sharply after the holiday ended but the market has stayed buoyant as households have continued to rethink their property needs.
Away from the booming housing market, consumers were more cautious, borrowing an extra £0.6bn – below the £1bn average before the coronavirus pandemic.
Only £0.1bn extra was borrowed on credit cards.
“A muted rise in consumer credit suggests that households were fairly cautious at the start of this year,” said Adam Hoyes at Capital Economics.
“With higher interest rates on the horizon and the cost of living crisis only set to worsen, we wouldn’t be surprised after a rebound in February to see credit growth remain weak in the months ahead.”
Still on data, spending in UK supermarkets fell over the last three months, but remained above pre-pandemic levels, even as grocery prices continued to surge.
According to consultancy Kantar, supermarket sales fell 3.7% year-on-year over the 12 weeks to 20 February, but were still 8.4% higher than the same period before the outbreak of Covid-19 in 2020.
The annual decline reflected last year’s winter lockdown, when people were still eating more meals and snacks at home as offices and the hospitality sector remained closed.
Kantar said the fall in spending came despite a new high in grocery prices, as inflation stood at 4.3% in February.
“Apart from the start of the pandemic, when we saw grocers cut promotional deals to maintain availability, this is the fastest rate of inflation we’ve recorded since September 2013,” said Kantar head of retail and consumer insight Fraser McKevitt.
“Added to this, ongoing supply chain pressures and the potential impact of the conflict in Ukraine are set to continue pushing up prices paid by consumers.”
In equity markets, Anglo-Russian precious metals miner Polymetal International plunged 26.28% and Russian steelmaker Evraz tanked 28.95%.
Polymetal was also in focus after private equity firm Blackrock took a punt on the beleaguered gold miner, doubling its stake to just over 10% even as the stock took a battering from sanctions imposed against Moscow.
On the FTSE 250, gold miner Petropavlovsk – which has operations in Russia – and iron ore pellet producer Ferrexpo tumbled 37.88% and 10.06%, respectively.
Paddy Power owner Flutter Entertainment was down 12.4% after it said underlying annual profit fell, as the gambling group was hit by a string of punter-friendly sporting results in the UK and Ireland.
Abrdn was 5.3% weaker even after the asset manager formerly known as Standard Life Aberdeen said annual profit rose, and it posted higher full-year revenue for the first time since it was formed from a merger in 2017.
Daily Mirror publisher Reach slid 25.71% after it said higher newsprint inflation would result in a drop in 2022 operating profit.
On the upside, defence company BAE Systems was ahead 3.7% for clear geopolitical reasons, while miners rose as metals prices advanced.
Rio Tinto was up 2.21%, Anglo American added 3.47%, and Antofagasta was 3.32% firmer by the close.
AstraZeneca pushed up 1.82% after it and Swiss biotechnology firm Neurimmune agreed to develop an antibody-based therapy for a rare, underdiagnosed condition that leads to heart failure in a $760m deal.
Rotork eked out gains of 0.13%, even after the engineering group reported a fall in annual profits.
Market Movers
FTSE 100 (UKX) 7,330.20 -1.72%
FTSE 250 (MCX) 20,500.64 -2.75%
techMARK (TASX) 4,374.13 -1.44%
FTSE 100 – Risers
BAE Systems (BA.) 746.20p 3.70%
Anglo American (AAL) 3,955.50p 3.47%
Antofagasta (ANTO) 1,571.50p 3.32%
Rio Tinto (RIO) 5,919.00p 2.21%
Sage Group (SGE) 716.40p 1.94%
AstraZeneca (AZN) 9,224.00p 1.82%
Rentokil Initial (RTO) 516.60p 1.73%
Pearson (PSON) 657.60p 1.48%
Severn Trent (SVT) 2,905.00p 1.01%
United Utilities Group (UU.) 1,084.00p 0.88%
FTSE 100 – Fallers
Evraz (EVR) 102.85p -28.95%
Polymetal International (POLY) 258.90p -26.28%
Flutter Entertainment (CDI) (FLTR) 9,456.00p -12.40%
Rolls-Royce Holdings (RR.) 92.00p -11.11%
Melrose Industries (MRO) 133.40p -10.02%
International Consolidated Airlines Group SA (CDI) (IAG) 136.08p -8.40%
Whitbread (WTB) 2,710.00p -7.63%
Barratt Developments (BDEV) 565.20p -7.50%
InterContinental Hotels Group (IHG) 4,859.00p -7.20%
Smith (DS) (SMDS) 320.40p -7.02%
FTSE 250 – Risers
Centamin (DI) (CEY) 103.85p 4.69%
Darktrace (DARK) 459.00p 3.75%
Endeavour Mining (EDV) 2,040.00p 2.51%
Biffa (BIFF) 333.00p 2.46%
HICL Infrastructure (HICL) 177.80p 2.18%
BlackRock World Mining Trust (BRWM) 740.00p 1.65%
Ultra Electronics Holdings (ULE) 3,266.00p 1.56%
Harbour Energy (HBR) 403.60p 1.36%
Hochschild Mining (HOC) 117.30p 1.03%
Chemring Group (CHG) 310.50p 0.97%
FTSE 250 – Fallers
Petropavlovsk (POG) 4.97p -37.88%
Reach (RCH) 169.00p -25.71%
Wizz Air Holdings (WIZZ) 3,013.00p -11.49%
888 Holdings (888) 216.80p -10.49%
Liontrust Asset Management (LIO) 1,356.00p -10.44%
Ferrexpo (FXPO) 151.70p -10.06%
Trainline (TRN) 184.30p -9.48%
easyJet (EZJ) 546.20p -9.36%
TUI AG Reg Shs (DI) (TUI) 219.10p -9.01%
Aston Martin Lagonda Global Holdings (AML) 934.20p -8.91%
