London stocks were still firmly in the red by midday on Monday after the West imposed tougher sanctions on Russia, which has now put its nuclear forces on high alert.
The FTSE 100 was down 1.1% at 7,405.50, while oil prices jumped to as high as $105 a barrel.
Walid Koudmani, chief market analyst at XTB, said: “While stocks saw some signs of recovery towards the end of last week with Asian, European and US markets recovering some of their losses following the invasion of Ukraine from Russia, stock prices could have a very difficult week ahead as tensions escalate and more sanctions continue to be announced.
“Over the weekend, the European union announced a variety of sanctions on Russia including limiting its access to EU airspace and prohibiting certain banks from utilising the Swift banking system, a move which could have catastrophic effects on the Russian economy and was by some considered to be on the most potentially effective deterrents.
“Investors are taking that into consideration and while the war for Ukraine rages on, this week is set to be one of the most volatile across markets with the prices of stocks and commodities being extremely susceptible to any kind of sanction and geopolitical instability. If the situation continues to escalate, risky assets like stocks and crypto currencies could be seeing another week of losses while investors continue to rush to safe havens like gold and the USD which benefited greatly last week from the shocking turn of events.”
Investors will be keeping an eye out for further developments in the Ukraine crisis, with high-level talks due to take place between Kyiv and Moscow later in the day on the Ukraine-Belarus border.
In equity markets, Anglo-Russian precious metals miner Polymetal, Russian steelmaker Evraz and Russian gold miner Petropavlovsk all tumbled.
Banks were also under the cosh, with HSBC, Lloyds, Barclays and NatWest lower.
BP lost ground after the oil giant said it will exit its near-20% holding in state-owned oil company Rosneft in response to Russia’s invasion of Ukraine, at an expected cost of around $25bn.
Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said: “Just how BP will manage this exit is unclear but it looks like it will be highly difficult for the company to recover anywhere near what was considered to be the full value of the stake, estimated to be $14 billion at the end of 2021 and it will also strip BP of lucrative dividends which were due to pour in from the Russian business.”
Primark owner AB Foods fell despite saying it expects half-year sales and adjusted operating profit to be strongly ahead of last year and higher than interims in pre-Covid in 2020.
Travel-related stocks were weaker again after the EU announced over the weekend that it was closing its airspace to Russian aircraft, with BA owner IAG, budget airlines Wizz and easyJet and travel firm Tui all sharply lower.
On the upside, defence companies BAE Systems and Babcock, defence technology firm Qinetiq and specialist defence manufacturer Chemring all rallied after Germany upped its defence budget over the weekend. Qinetiq was also benefitting from a rating upgrade at JPMorgan.
Outsourcing group Bunzl was a high riser after the release of its annual results.
Market Movers
FTSE 100 (UKX) 7,405.50 -1.12%
FTSE 250 (MCX) 20,802.90 -0.50%
techMARK (TASX) 4,406.14 1.47%
FTSE 100 – Risers
BAE Systems (BA.) 741.40p 13.54%
Hikma Pharmaceuticals (HIK) 2,092.00p 7.45%
Bunzl (BNZL) 2,903.00p 5.18%
Rightmove (RMV) 665.00p 3.36%
Entain (ENT) 1,694.00p 2.20%
B&M European Value Retail S.A. (DI) (BME) 594.00p 2.10%
Halma (HLMA) 2,382.00p 1.84%
Rentokil Initial (RTO) 503.60p 1.78%
Antofagasta (ANTO) 1,473.00p 1.76%
Flutter Entertainment (CDI) (FLTR) 10,580.00p 1.73%
FTSE 100 – Fallers
Polymetal International (POLY) 398.40p -50.10%
Evraz (EVR) 151.50p -25.99%
Mondi (MNDI) 1,629.00p -8.82%
Coca-Cola HBC AG (CDI) (CCH) 1,961.50p -8.17%
BP (BP.) 355.00p -6.21%
HSBC Holdings (HSBA) 509.70p -5.26%
Lloyds Banking Group (LLOY) 47.33p -4.72%
Prudential (PRU) 1,129.00p -4.65%
Barclays (BARC) 180.22p -4.60%
NATWEST GROUP PLC ORD 100P (NWG) 225.50p -4.33%
FTSE 250 – Risers
Chemring Group (CHG) 308.50p 13.00%
QinetiQ Group (QQ.) 294.20p 11.86%
Darktrace (DARK) 446.80p 9.72%
Babcock International Group (BAB) 330.70p 7.83%
Ferrexpo (FXPO) 164.20p 7.32%
Centamin (DI) (CEY) 99.40p 5.23%
Ultra Electronics Holdings (ULE) 3,216.00p 4.76%
Drax Group (DRX) 695.50p 4.74%
Energean (ENOG) 1,039.00p 4.53%
Oxford Biomedica (OXB) 733.00p 3.97%
FTSE 250 – Fallers
Petropavlovsk (POG) 7.00p -26.24%
Wizz Air Holdings (WIZZ) 3,282.00p -8.25%
RHI Magnesita N.V. (DI) (RHIM) 2,804.00p -6.91%
easyJet (EZJ) 587.00p -6.26%
Cineworld Group (CINE) 38.63p -6.22%
Hays (HAS) 132.10p -5.51%
TUI AG Reg Shs (DI) (TUI) 238.50p -5.51%
Provident Financial (PFG) 281.60p -4.93%
Close Brothers Group (CBG) 1,132.00p -4.31%
Virgin Money UK (VMUK) 181.80p -4.19%
