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(Alliance News) - Blue-chip European equities showed promising signs of recovery in afternoon trade on Monday, paring heavier declines, though traders remain on edge as the Russian invasion of Ukraine continues to send shockwaves through global markets.
In a familiar pattern, companies with an exposure to Russia were the worst hit at the start of the week. Elsewhere, the prospect of chunkier government defence spending lifted the likes of BAE Systems in London and Thales over in Paris.
The FTSE 100 index closed down 31.21 points, or 0.4%, at 7,458.25. The large cap benchmark had been 1.7% lower earlier on Monday.
The mid-cap FTSE 250 index had a stellar afternoon recovery, closing up 174.30 points, or 0.8%, at 21,081.05. The AIM All-Share index closed up 10.06 points, 1.0%, at 1,040.36.
The Cboe UK 100 index closed down 0.3% at 742.56. The Cboe 250 rose 0.8% to 18,747.84, and the Cboe Small Companies ended down 0.6% at 14,789.70.
In mainland Europe, the CAC 40 in Paris ended down 1.4%, while the DAX 40 in Frankfurt closed down 0.7%. They had each been more than 3% lower earlier on Monday.
"While still down from Friday's close, equity markets have been steadily closing the gaps down many suffered as trading got underway this morning. The lack of any obvious progress in the Russia-Ukraine ceasefire talks has not provoked any further selling, and for now the lows of the day are intact. Even Russian threats of escalation do not, as yet, appear to be having much of an impact," IG analyst Chris Beauchamp commented.
Russia and Ukraine met Monday for their first talks since the outbreak of war last week, with Kyiv demanding an "immediate ceasefire" and the West ratcheting up its financial sanctions in a bid to force the Kremlin to buckle.
The meeting came as Russian shelling killed 11 people in Ukraine's second largest city of Kharkiv after days of fighting that have seen the biggest cities, including Kyiv, stay out of Russian hands.
Sanctions imposed by the West over the weekend had an immediate impact on Moscow financial markets on Monday, with the Russian ruble falling to a record low and the central bank more than doubling the key interest rate to 20%.
The US also announced Monday that it had banned all US transactions with Russia's central bank and would freeze its foreign reserves, while traditionally neutral Switzerland also said it would adopt the same measures as the EU.
The dollar hit an intraday high of RUB109.27 against the ruble on Monday, before easing to RUB94.60 at the time of the London equities close. It had fetched RUB82.92 at the same time on Friday.
Elsewhere in currency markets, the pound was quoted at USD1.3415 late Monday, up slightly from USD1.3409 at the London equities close Friday.
The euro was priced at USD1.1243, down from USD1.1258. Against the safe-haven yen, the dollar was trading at JPY115.27 in London, lower against JPY115.61.
"Overall, the initial shock of conflict has worn off, and aside from the huge impact on Russian stocks and the ruble the atmosphere is far less febrile than it was last week. It looks like a major escalation in the conflict would be required to prompt a further leg down," Beauchamp added.
Brent slipped below the USD100 a barrel mark but stood at a robust USD97.65 at the time of the European equities close on Monday, up from USD97.16 on Friday.
Gold stood at USD1,900.27 an ounce, firm from USD1,887.00.
The heaviest decline in London's FTSE 100 came from gold miner Polymetal, which slumped 56%. The stock has tanked more than 65% over the past four sessions with investors mindful of its exposure to Russia.
Steel maker Evraz was similarly hit once again, dropping 29% on Monday.
Packaging firm Mondi fell 5.2% as it continues to monitor the war in Ukraine, and how any potential sanction against Russia could harm its business.
It noted that over 10% of its revenue comes from its operations in Russia.
BAE Systems, meanwhile, topped London's blue-chip index, advancing 10%.
Germany on Sunday announced a "historic" shift in its foreign and defence policy.
Hours after Germany dramatically reversed its ban on lethal weapons exports to conflict zones by announcing huge shipments to Ukraine, Chancellor Olaf Scholz said EUR100 billion will be earmarked for investments for the army in 2022 alone.
In Paris, Thales rose 12%, while in New York, Raytheon Technologies and Lockheed Martin added 3.9% and 5.4%, respectively.
Wider markets in New York were mixed, however. The Dow Jones Industrial Average was down 0.3% at the time of the closing bell in London. The S&P 500 was marginally higher and the Nasdaq Composite was up 0.8%.
Back in London, and away from conflict-driven market moves, M&A activity lifted Oxford Instruments by 19%. The FTSE 250 constituent, which makes scientific tools for research and industry, confirmed it received a new takeover offer proposal from Spectris worth about GBP1.8 billion.
The offer followed a "series of earlier proposals" from the supplier of precision instrumentation & controls, which is also a London-listed midcap.
Spectris shares closed down 9.0%, one of the worst FTSE 250 performers. Oxford Instruments jumped 30%, however.
Oxford Instruments said it is "minded" to recommend the offer to its shareholders.
Spectris has until March 28 to make a firm offer or walk away from the deal.
Elsewhere in London, McColl's Retail Group plunged 63% as it delivered a profit warning while continuing to seek funding to stay afloat.
For the financial year ended November 28, results are expected to be in line with guidance, with adjusted earnings before interest, tax, depreciation and amortisation set to be around GBP20 million, down 31% from GBP29.1 million the year before.
The Brentwood-based convenience store operator's revenue is to drop 11% year-on-year to GBP1.11 billion from GBP1.25 billion.
On the financing front, McColl's said it remains in talks with its lending banks for a longer-term agreement relating to the balance of its facility.
Although the group had raised GBP30 million in September, that cash has since been absorbed by the trading shortfall in the second half of the 2021 financial year.
Looking ahead, McColl's said it will continue to seek a solution to its financing issues. A recent approach to buy the whole business has now been withdrawn, but McColl's said it also has received indications of interest for parts of the business.
On Tuesday's economic calendar, there are manufacturing PMI numbers from China overnight, before the eurozone at 0900 GMT, the UK at 0930 GMT and the US at 1445 GMT.
A stacked local corporate calendar has annual results from asset manager abrdn, speciality chemicals company Croda International and Paddy Power owner Flutter Entertainment.
By Eric Cunha; ericcunha@alliancenews.com
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