London shares prices strengthen as oil eases down

London shares prices managed a positive finish on Monday, as investors watched for updates on talks between Russia and Ukraine, with weakness in the heavily-weighted mining sector dragging on the gains.

The FTSE 100 ended the session up 0.57% at 7,196.25, and the FTSE 250 was 1.28% firmer at 20,464.68.

Sterling was in a mixed state, last gaining 0.12% on the dollar to trade at $1.3053, while it weakened 0.54% against the euro to change hands at €1.1884.

“Equity markets have rediscovered much of their optimism it seems today,” quipped IG chief market analyst Chris Beauchamp.

“Sharp falls in oil prices, and indeed in other commodities, have temporarily assuage fears about rampant inflation, and with that in mind investors are looking to try and pick up some bargains.

“Of course some nervousness persists as Wednesday’s long-awaited Fed decision nears, but given that a quarter-point rate increase is all but guaranteed there might not be too much in the way of surprises from Jerome Powell and his team.”

Oil prices remained the headline, dipping earlier as traders clung to hopes that peace talks between Russia and Ukraine would make headway.

Prices for the thick black stuff surged to highs not seen in 14 years in the last fortnight, following Russia’s invasion of Ukraine, with benchmark Brent crude touching nearly $140 a barrel at one point.

Prices started to pull back from highs over the weekend, however, and continued to soften on Monday.

At 1637 GMT, Brent crude futures were down 6.91% on ICE at $104.88 per barrel, and West Texas Intermediate was off 7.29% at $101.36.

Moscow claimed that “substantial progress” had been made in talks and that a “joint position” could be reached soon, according to state-controlled news agency RIA.

On Sunday, Ukrainian negotiator Mykhailo Podolyak also said he thought progress could be made in the coming days.

However, Russia continued its attacks on Ukraine, including targeting a military base in Yavoriv, close to the border with NATO member Poland.

“Oil traders have been hoping that they will get better news on the Russia and Ukraine war, as there was some optimism that peak talks were moving in the right direction,” said Naeem Aslam, chief market analyst at AvaTrade.

“However, the weekend’s events have disrupted that optimism and we are expecting the oil prices to continue their bull run and remain immensely volatile.”

In economic news, British companies were expecting to raise prices at an “unprecedented” pace this year, according to a business survey published earlier.

The IHS Markit UK Business Outlook found that a net balance of 62% of private sector firms planned to increase prices this year, compared to 56% in October and the highest in the survey’s 12-year history.

IHS Markit attributed the expected price hikes, the pace of which it said was “unprecedented”, to significant rises in both energy and wage costs.

Staff cost projections, fuelled by salary demands, surged to a survey-high net balance of 83%. Staff cost forecasts were highest in London and the south east.

Profits were still expected to grow, although forecasts were weaker compared to the first half of 2021.

“The underperformance reflected concerns that firms will be unable to fully pass their expenses onto customers, and that sales will be tempered by the cost of living crisis,” IHS Markit noted.

Manufacturers, meanwhile, were continuing to raise both UK and export prices at record levels, another survey revealed, amid escalating inflationary pressures across the board which showed little sign of abating.

According to the Make UK/BDO first quarter manufacturing outlook survey, UK prices rose to a balance of 58% in the first quarter, from 52% in the final three months of 2021 – the highest balances in the survey’s history, and the fourth consecutive quarter with record numbers of companies increasing prices.

Given the survey was conducted before the invasion of Ukraine and the subsequent substantial increases in the energy costs and raw materials, Make UK said price increases were likely to have pushed even higher since then.

“While having fallen slightly in the first quarter, output and order balances remain at historically high levels,” said BDO head of manufacturing Richard Austin.

“However, supply shortages are severe, and we are seeing a worrying widening of the gap between supply and demand.”

In equity markets, miners were a drag as base metals prices fell, with Anglo American down 5.17%, Glencore losing 5.82%, Rio Tinto off 4.76%, and Antofagasta 1.27% weaker.

Rio Tinto was also in focus after the Anglo-Australian miner made a $2.7bn bid to buy the 49% of Canada’s Turquoise Hill it did not already own, as it looked to settle its relationship with the Mongolian government over the massive Oyu Tolgoi copper project.

The company said it was offering CAD 34.00 (£20.41) in cash per share – a 32% premium to Turquoise Hill’s last closing price in Toronto.

Elsewhere, British American Tobacco was 1.39% weaker after cutting its full-year guidance late on Friday, while announcing its exit from Russia.

Housebuilders featured on the upside, meanwhile, with Persimmon jumping 5.52% after a Sunday Telegraph report suggested that the cost for cladding remediation work could be much less than the £4bn initially estimated.

According to the Telegraph, a review commissioned by the House Builders Federation put the potential cost at less than £1bn.

Bodycote gained 2.27% after the thermal processing services provider hailed “good progress” in 2021, with both revenues and profits higher.

Phoenix Group was up 0.96% after the life insurer boosted its dividend after annual cash generation exceeded expectations.

Network International Holdings was ahead 7.74% as it continued to benefit from a guidance upgrade for 2022, and forecast little disruption from Russia’s invasion of Ukraine.

In geopolitical movements, Anglo-Russian precious metals miner Polymetal International managed gains of 0.9%, having surged earlier in the session as investors bagged a bargain following recent heavy losses.

Russia focused gold miner Petropavlovsk rocketed 9.09%, meanwhile, after the Times reported that Russian billionaire and banking oligarch Sergey Sudarikov bought a 29% stake in the company.

Sudarikov, who is behind the Region financial group, apparently bought the stake on the cheap from fellow Russian tycoon Konstantin Strukov, who owns gold miner UGC and is the largest shareholder in the London-listed company.

Market Movers

FTSE 100 (UKX) 7,196.25 0.57%

FTSE 250 (MCX) 20,464.68 1.28%

techMARK (TASX) 4,246.15 0.97%

FTSE 100 – Risers

Ferguson (FERG) 11,670.00p 5.85%

Smith (DS) (SMDS) 324.40p 5.67%

Persimmon (PSN) 2,292.00p 5.52%

Barclays (BARC) 170.00p 5.52%

Smurfit Kappa Group (CDI) (SKG) 3,306.00p 5.22%

Lloyds Banking Group (LLOY) 47.73p 4.99%

Admiral Group (ADM) 2,688.00p 4.67%

NATWEST GROUP PLC ORD 100P (NWG) 217.80p 4.56%

Ashtead Group (AHT) 5,106.00p 4.40%

Mondi (MNDI) 1,466.50p 4.19%

FTSE 100 – Fallers

Glencore (GLEN) 481.55p -5.82%

Anglo American (AAL) 3,698.50p -5.17%

Rio Tinto (RIO) 5,311.00p -4.55%

Scottish Mortgage Inv Trust (SMT) 876.60p -2.17%

Prudential (PRU) 1,045.50p -2.11%

Shell (SHEL) 1,926.80p -1.87%

Flutter Entertainment (CDI) (FLTR) 8,812.00p -1.54%

British American Tobacco (BATS) 3,022.50p -1.48%

Fresnillo (FRES) 720.80p -1.29%

BAE Systems (BA.) 723.60p -1.28%

FTSE 250 – Risers

Petropavlovsk (POG) 3.08p 11.93%

Coats Group (COA) 74.10p 7.55%

Network International Holdings (NETW) 216.70p 7.17%

Mitie Group (MTO) 54.40p 6.88%

Balfour Beatty (BBY) 263.20p 6.04%

Reach (RCH) 189.60p 5.92%

Jupiter Fund Management (JUP) 200.60p 5.80%

Baltic Classifieds Group (BCG) 130.00p 5.69%

Homeserve (HSV) 668.00p 5.36%

Ashmore Group (ASHM) 237.00p 5.33%

FTSE 250 – Fallers

Fidelity China Special Situations (FCSS) 228.00p -7.13%

National Express Group (NEX) 237.80p -5.18%

BlackRock World Mining Trust (BRWM) 736.00p -4.54%

Volution Group (FAN) 410.50p -3.75%

Wizz Air Holdings (WIZZ) 2,775.00p -3.61%

Bellevue Healthcare Trust (Red) (BBH) 172.00p -3.48%

Endeavour Mining (EDV) 1,900.00p -3.31%

TBC Bank Group (TBCG) 992.00p -3.12%

Diversified Energy Company (DEC) 107.00p -3.08%

Dr. Martens (DOCS) 232.80p -3.00%


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