Ukraine fears trigger market slide, oil at $95 a barrel
European stock markets have fallen sharply as investors react to America’s warning of an imminent Russian invasion of Ukraine.
Benchmarks in France and Germany are down by 3% and the FTSE 100 index fell 2%, with travel stocks among those under pressure and Russia-focused steel and mining company Evraz down by a third in value.
The price of Brent crude rose to a seven-year high above $95 a barrel, adding to cost-of-living pressures in the UK economy.
Kuwait’s National Aviation Services upped the pressure on rival airport services group John Menzies today, saying its £469 million takeover bid was “full and fair”.
It said management had not “meaningfully engaged” on the 510p a share offer which it called a “compelling opportunity for John Menzies shareholders to realise their investment in cash in the near-term”.
John Menzies shares fell 18p to 464p today, far below the value of the offer. That suggests the City thinks the bid has little chance.
But it does bolster NAS’s case that the offer is worth considering.
NAS chief executive officer Hassan El-Houry said: “As operators ourselves, we also see a sector facing a number of challenges and a company that lacks the balance sheet to thrive.”
John Menzies has been hit by the decline in air travel during Covid. It insists management has a plan to re-build the business.
The company is among the biggest providers of fuelling, ground handling and maintenance services at airports.
Audioboom jumps on bid speculation
15:08 , Oscar Williams-Grut
Audioboom shares have jumped 10% today after a weekend report that Spotify and Amazon are looking at takeover bids for the podcast platform.
Sky News said the two tech giants have been pondering a bid for a few weeks. Amazon has reportedly asked JP Morgan bankers to work on a deal. Audioboom made no comment this morning.
The shares today gained 185p to 1944p, which leaves the business valued at £306 million.
Audioboom has had a healthy pandemic with very strong growth that has seen it become the fourth biggest podcaster in the US.
Revenues grew by 125% in 2021 to $60 million. CEO Stuart Last said the last year has been “phenomenal” with its shows downloaded 116 million times. Audioboom rejected a bid from All Active Asset Capital last year.
The company hosts pods for the BBC, NBC Sports and Yahoo, among others. It listed on the AIM market in 2014.
14:55 , Oscar Williams-Grut
ARM Holdings, we are told, is going to New York.
SoftBank, its Japanese owner, is planning to list the chip designer in the US because of the favourable valuations over there. But will it actually end up on Wall Street?
SoftBank boss Masayoshi Son was planning to sell ARM to Nvidia until he wasn’t. The deal was derailed by national security concerns, loud opposition from ARM co-founder Hermann Hauser and stock market volatility.
There’s no reason why ARM’s path couldn’t be altered once again. Politicians, the technorati and the press should do everything possible to woo the Cambridge chip-maker back to London.
Read today’s City comment.
Salter mixer maker sees sales jump on lockdown cooking boom
14:35 , Oscar Williams-Grut
Salter mixer owner Ultimate Products is enjoying a jump in sales as a boom in cooking at home drives Brits to upgrade their domestic appliances.
The homewares company today reported revenues of £85.7 million in the six months to January 31 — growth of 13.7% on the previous year.
Ultimate Products, whose Salter-branded goods are advertised by Heston Blumenthal, put increased demand for its cooking and cleaning products down to “a long-term change in consumer behaviour to more home cooking, working and cleaning” in its most recent annual report.
Like most businesses, the Oldham-based company has been battling supply chain problems but today said there were “early signs of improvement and the board is cautiously optimistic that the worst is behind the group.”
14:25 , Oscar Williams-Grut
London developer Galliard Homes is betting on continued demand for British property from Hong Kong investors despite an exodus of many wealthy locals due to the growing influence of Beijing on the peninsula.
Galliard, the largest private property developer in the capital, has announced the opening of its first dedicated sales office in Hong Kong, which will market London flats to Chinese investors.
The decision to open a dedicated marketing suite comes despite an exodus of many wealthy Hong Kongers from the area due to the growing influence of mainland China. Beijing pushed through a controversial and widely condemned National Security Law in 2020 that cracked down on freedom of expression.
Galliard’s push also comes as other Western businesses go the other way. Bank of America and Wells Fargo are both looking at moving staff out of Hong Kong as strict Covid-19 quarantine measures make business in the region difficult.
Read the full story.
Rolls-Royce in green jet deal
14:07 , Oscar Williams-Grut
Rolls-Royce has announced a partnership with private jet charterer Luxaviation to help develop a new fleet of electric passenger planes.
The British aerospace business will build charging points and provide maintenance services for electric planes, to be stationed at a number of planned ‘vertiports’ – airports for vertical take-off flights.
Luxaviation charters luxury private planes for wealthy clients, including celebrities, business owners and senior politicians. The Luxembourg-based company has committed to making all new product operations net-zero by 2050.
Read the full story.
Weapons, gold and cigarettes help FTSE out perform
13:42 , Oscar Williams-Grut
It’s not quite guns, germs and steel but it’s not far off: the FTSE 100 is performing relatively better than peers in afternoon trade thanks to defense, gold and cigarette plays.
The bluechip index is down around 1.3% at typing time, which is better than indexes on the continent. The CAC 40 in Paris is down an eye-watering 2.1%.
London is being supported by gold miners, with Fresnillo top of the index – up 5.4%. British American Tobacco is just behind, boosted by a buyback announcement on Friday. (BA)E Systems, which makes guns and fighter jets, is also one of the few companies making gains today.
That about sums up the mood in the markets this afternoon.
11:54 , Oscar Williams-Grut
Hugo Boss is investing in an innovative new material that claims to be carbon negative.
The German fashion house, advertised by Hailey Bieber, above, has invested $5 million in Switzerland’s HeiQ and signed a deal to help commercialise its new product, AeoniQ. Hugo Boss also has an option to invest a further $4 million at a $200 million valuation.
Production of the new yarn actually sucks CO2 from the atmosphere and uses 99% less water than polyester or nylon. Lycra has signed a deal to distribute the new material.
The new funding will be used to develop a production plant for AeoniQ. Shares in HeiQ jumped 8.3% to 91.5p, valuing the company at £122 million.
FTSE 100 down 2%, Evraz and Ferrexpo sharply lower
10:38 , Graeme Evans
Roman Abramovich-backed steel business Evraz led a long list of FTSE 100 fallers today as rattled investors dumped stocks with connections to the Ukraine crisis.
Evraz slumped 35%, although part of this was due to shares trading without the right to a dividend relating to the company’s demerger of coal operations.
Chelsea FC owner Abramovich holds a 28% stake in the business, which boasts significant steel production and iron ore mining assets and is facing uncertainty amid the potential threat of sanctions against Russia in the event of an invasion. Shares were trading at 286p.
Ferrexpo, which mines iron ore pellets in Ukraine, also fell by 7% or 20.6p to 263.6p, meaning the FTSE 250-listed stock has lost almost half its value since August.
Investors sought safety in precious metals, with Fresnillo sharply higher as Mexico’s largest gold producer rose 5% in the FTSE 100. Second-tier gold miner Centamin also rallied 2%.
The FTSE 100 index tumbled more than 2% or 158.28 points to 7502.74, erasing a large chunk of London’s progress so far this year. Travel-based stocks were badly hit by the Ukraine developments and latest surge in oil prices, with British Airways owner IAG down more than 6% or 11.4p to 163.3p and Rolls-Royce off 5.7p to 115.2p.
Financial stocks including Barclays were as much as 4% lower, whereas safe haven assets including British American Tobacco and (BA)E Systems featured on a shortened risers board.
The FTSE 250 index fell 2.3% or 510.70 points to 21,538.01, led by 7% declines for Eastern Europe-focused carrier Wizz Air and for cruise ship business Carnival.
Property investment trust LXI fell 0.4p to 141.8p after announcing nine acquisitions funded by its recent £250 million equity capital raise. They range from three Co-op convenience stores to a car park in York and Premier Inn in Exeter.
Fears of an imminent invasion of Ukraine have sent shares sharply lower, with the FTSE 100 index down 1.5% or 115 points from last week’s two-year high to stand at 7547.
Shares in Russia-focused steel and mining company Evraz lost a third of their value in the top flight, while British Airways owner IAG fell by more than 7%.
The FTSE 250 index is down 1.6%, with Wizz Air the biggest faller after declining 8%.
The sell-off came as Hargreaves Lansdown said UK investor confidence appeared to be faltering in the face of Ukraine developments and the surge in inflation.
Its monthly survey of clients showed that confidence in the UK has fallen by 11% this month, the biggest drop of any global region.
Hargreaves Lansdown’s senior investment analyst Susannah Streeter said: ‘Energy markets are clearly on edge and if supplies are threatened there is a risk oil will shoot up even higher, adding to price pressures for companies.”
Big week for UK economic updates
08:13 , Graeme Evans
Wednesday’s UK inflation figure for January is forecast to hold steady at around 5.4% or 5.5%, but given recent events there’s a good chance of an upside surprise.
And the 54% rise in utility prices on April 1 means the consumer prices index (CPI) will eventually jump to 7.5%, in line with last week’s bigger-than-expected 40-year high for US inflation.
Paul Dales, chief UK economist at Capital Economics, said recent trends suggest that where US inflation goes, UK inflation will soon follow.
“This usually happens because the economic cycles in the US and the UK tend to be closely aligned and as inflation in both economies is influenced by the same global factors. But it is striking how over the past year inflation in the UK has followed inflation in the US with a lag of about six months.”
Capital Economics thinks that UK interest rates will rise to a peak of 2% in this cycle, perhaps in 2023. That’a a bit more than the peak rate of 1.75%-2% priced into financial markets, partly due to its view that price and wage pressures will linger into 2023.
Dales expects the labour market to remain tight for most of this year and next, although the lingering effects of the end of the furlough scheme and impact of Omicron will probably mean a fall in December employment when numbers are released on Tuesday.
Base effects are likely to result in the rate of earnings growth easing from 4.2% to 3.8%, ensuring that real wage growth is still negative.
The latest seven-year high for Brent crude comes amid fears that supplies could be disrupted by potential sanctions should Russia invade Ukraine. The fears add to ongoing industry pressures as OPEC+ members struggle to meet their monthly target to increase production by 400,000 barrels a day.
The ongoing tensions in Ukraine caused the 10-year US bond yield to fall back to 1.95%, having gone through the 2% threshold last week after US interest rate expectations were lifted by a bigger-than-expected inflation figure of 7.5%.
The Nikkei fell 2% today as investors in Japan tracked the Wall Street sell-off prior to the weekend. Wednesday’s release of minutes from the Federal Reserve’s most recent meeting should provide more insight into the likely pace of rate hikes in the US in 2022.
In the UK, the speed of action by the Bank of England may hinge on this week’s economic data, with inflation figures on Wednesday due to show the consumer prices index reached 5.5% in January. Unemployment and wage figures are also due on Tuesday.
The FTSE 100 index finished higher for a second week in a row on Friday, but CMC Markets is forecasting the top flight to open 45 points lower at 7,616 today.
Ukraine fears trigger market slide, oil at $95 a barrel