London close: Stocks slightly higher as US, UK announce Russian oil ban

by | Mar 8, 2022

London stocks closed marginally stronger on Tuesday, as oil prices began a fresh surge on the back of news the UK and US would blockade Russian energy imports.
The FTSE 100 ended the session up 0.07% at 6,964.11, and the FTSE 250 was 0.25% firmer at 19,217.62.

Sterling was in the red against its main pairs, last falling 0.02% on the dollar to $1.3101, and weakening 0.27% against the euro to change hands at €1.2040.

“After an initially negative start European markets managed to claw their way back into positive territory, on a report that the EU is mulling the idea of issuing joint bonds in respect of energy and defence spending, as it looks to reduce its dependence on Russian energy, as well as lessen its reliance on the NATO when it comes to safeguarding its security,” said CMC Markets chief market analyst Michael Hewson.

“The prospect of a new stimulus plan in the wake of all this volatility is a welcome development, but as with anything EU related the devil will be in the detail, and this report has been played down by the EU Commission’s vice president and European Green New Deal head Frans Timmermans.

“In any case the rebound off the lows has been tempered by the decision by the US and UK to ban Russian oil imports, in a move that could prompt retaliation from Russia, after deputy prime minister Novak threatened that such a move would see Russia shut off supplies to Nord Stream 1.”

Hewson noted that the continued move higher in oil prices saw the likes of BP and Shell “lead the way”, helping to underpin London’s top-flight index.

Both the UK and the United States confirmed late in the afternoon that they would be banning oil imports from Russia, as part of their latest economic punishment for the country’s unprovoked and ongoing invasion of Ukraine.

Oil futures were rocketing on the news, with Brent crude last up 7.25% on ICE at $132.14 per barrel, and West Texas Intermediate ahead 7.28% at $128.09.

Westminster said the UK would phase out Russian oil products by the end of the year, giving markets and supply chains time to adjust to the change.

According to the BBC, the UK relies less on Russian imports for its energy mix than many of its European peers, with the country being behind 8% of supplies.

The hit to transport and logistics could be more significant, however, with 18% of UK diesel being imported from Russia.

Soon after the UK announcement, US president Joe Biden announced a total ban on Russian oil, gas and coal, calling it the cost of “defending freedom”.

Biden said pump prices would rise for American motorists, but said it was part of ensuring Putin would not achieve victory in Ukraine.

“We will not be part of subsidising Putin’s war”, the president said.

Away from the war, industry data released earlier showed UK grocery sales stabilising last month, as the sector continued to rebound from the worst of the pandemic.

According to NielsenIQ, total till sales were down 3.4% in the four weeks to 26 February, only marginally weaker than January’s 2.9% decline.

In total, shoppers spent £9.7bn in the UK’s main supermarkets during the four weeks, down 4.2% on the same period a year earlier, but ahead 4.4% when compared to pre-Covid levels two years ago.

“Moreover, as shopping behaviour normalises, industry spend per visit is stabilising at £18.50 compared to £21.10 this time last year and is now close to £17.20 of February 2020, suggesting the end of Covid-19 trendlines,” NielsenIQ noted.

More widely, UK retail sales continued to grow in February, with the latest BRC-KPMG Retail Sales Monitor showing total sales rising 6.7% in the four weeks to 26 February, compared to an increase of 1% in the same period in 2021, when the UK was in lockdown.

The figure was marginally ahead of the three-month average of 6.5%, but well below the 12-month average of 11.3%.

In January, total sales rose by 11.9%.

“February saw continued sales growth, although dampened by Storm Eunice and falling consumer confidence,” said Helen Dickinson, chief executive of the BRC.

“Traditional try-before-you-buy products, like furniture and home accessories, as well as fashion and jewellery, continued to be the high-flyers, as more people returned to stores.”

Across the channel, economic activity in the single currency bloc slowed sharply at the end of 2021, as the appearance of the Omicron variant of Covid-19 hit consumption.

According to Eurostat, gross domestic product in the eurozone expanded at a quarter-on-quarter pace of 0.3% over the three months to December, exactly as expected.

That followed jumps in growth of 2.2% and 2.3% in the preceding two quarters, while in annual terms GDP growth clocked in at 4.6%.

Still on data, German industrial production strengthened in January, beating expectations.

Destatis said production rose 2.7% in January from December, the highest rate since late 2020, or by 1.8% against January 2021.

Most analysts had been expecting month-on-month growth closer to 0.5%.

Industrial production for December was also revised sharply upwards, to 1.1% compared to Destatis’s earlier estimate of a 0.3% decline.

In equity markets, Russian steelmaker Evraz added 1.25% and gold miner Petropavlovsk jumped 20%, as bargain hunters entered the fray after recent invasion-fuelled losses.

M&G rallied 15.03% after it announced a £500m share buyback, and a reduced annual operating profit resulting partly from changes to the expected death rate.

Fresnillo was 9.33% more sparkly after the precious metals miner posted a jump in full-year profit and revenues, thanks in part to higher silver prices.

Sector peer Hochschild Mining was also in the green, advancing 18.53% on the back of rising gold prices, as the safe-haven metal remained in demand.

Flexible workspace provider IWG surged 9.72% after announcing, alongside its full-year results, the merger of its digital assets with the Instant Group, with a view to listing the business in the next two years.

Broadcaster ITV was ahead 7.79% after an upgrade to ‘outperform’ at Bernstein.

On the downside, high street bakery Greggs was off 3.37% after it warned of significant cost headwinds in 2022 from inflation and higher commodity prices.

Precious metals miner Polymetal International plummeted 46.67%, going against the positive bargain-hunting performance of some of its Russian compatriots.

Capricorn Energy was 6.45% lower despite swinging to an annual profit, boosted by the resolution of its tax dispute with the Indian government as its board said it hoped to return the refund to shareholders in the second quarter.

Travis Perkins was in the red by 5.42% after a downgrade to ‘hold’ at Jefferies.

Market Movers

FTSE 100 (UKX) 6,964.11 0.07%
FTSE 250 (MCX) 19,217.62 0.25%
techMARK (TASX) 4,046.88 -0.46%

FTSE 100 – Risers

M&G (MNG) 205.10p 15.03%
Fresnillo (FRES) 808.40p 9.33%
ITV (ITV) 79.16p 7.79%
BP (BP.) 380.00p 5.12%
International Consolidated Airlines Group SA (CDI) (IAG) 121.28p 4.34%
Phoenix Group Holdings (PHNX) 603.00p 3.64%
Rolls-Royce Holdings (RR.) 91.38p 3.59%
Aviva (AV.) 386.40p 3.18%
WPP (WPP) 947.80p 3.13%
Shell (SHEL) 2,039.50p 2.95%

FTSE 100 – Fallers

Polymetal International (POLY) 92.02p -46.67%
Relx plc (REL) 2,071.00p -6.42%
Ocado Group (OCDO) 1,105.00p -6.40%
Rightmove (RMV) 612.80p -6.01%
Rentokil Initial (RTO) 444.50p -5.69%
London Stock Exchange Group (LSEG) 6,998.00p -5.29%
Informa (INF) 495.10p -4.57%
Intertek Group (ITRK) 4,735.00p -4.56%
Croda International (CRDA) 6,736.00p -4.43%
Experian (EXPN) 2,706.00p -4.31%

FTSE 250 – Risers

Petropavlovsk (POG) 3.03p 20.00%
Hochschild Mining (HOC) 146.50p 18.53%
TUI AG Reg Shs (DI) (TUI) 201.30p 10.34%
IWG (IWG) 255.00p 9.72%
Ferrexpo (FXPO) 125.40p 8.10%
Morgan Sindall Group (MGNS) 2,200.00p 7.58%
Reach (RCH) 161.60p 7.02%
Essentra (ESNT) 272.50p 5.83%
Domino’s Pizza Group (DOM) 368.00p 5.44%
Vesuvius (VSVS) 365.60p 5.36%

FTSE 250 – Fallers

TI Fluid Systems (TIFS) 179.00p -7.35%
Capricorn Energy (CNE) 200.20p -6.45%
Currys (CURY) 84.40p -6.43%
Hammerson (HMSO) 29.60p -6.09%
Genus (GNS) 2,882.00p -5.82%
Travis Perkins (TPK) 1,227.50p -5.42%
Baltic Classifieds Group (BCG) 99.80p -4.95%
Network International Holdings (NETW) 171.80p -4.93%
Liontrust Asset Management (LIO) 1,090.00p -4.89%
Games Workshop Group (GAW) 6,365.00p -4.57%

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