(Alliance News) - Stock prices in London are seen opening lower on Monday, as geopolitical tensions weigh on sentiment but lift crude prices.
An escalation of the Russia-Ukraine threat level by the US on Friday hurt equities in New York. Stocks in Asia slumped on Monday.
"Markets appear slightly more concerned about events on the Russia, Ukraine border, which saw oil prices rise sharply late on Friday to new 7-year highs, and which have continued to rise in Asia markets, this morning. The rising tensions also saw bond yields slip back, while US stock markets closed sharply lower on Friday, and has translated into sharp falls in Asia markets," CMC Markets analyst Michael Hewson commented.
IG futures indicate the FTSE 100 index is to open 80.5 points lower, or 1.1%, at 7,580.52. The blue chip index closed down 11.38 points, or 0.2%, at 7,661.02 on Friday.
In early UK corporate news, chemicals company Synthomer said it expects to meet earnings expectations, while a John Menzies suitor once again backed its takeover offer for the aviation services company.
Efforts to defuse the crisis in Ukraine via a frenzy of telephone diplomacy failed to ease tensions Saturday, with US President Joe Biden warning that Russia faces "swift and severe costs" if its troops carry out an invasion.
Russian leader Vladimir Putin slammed Western claims that Moscow was planning such a move as "provocative speculation" that could lead to conflict in the ex-Soviet country, according to a Russian readout of a call with French President Emmanuel Macron.
Speaking after new phone talks between Putin and Biden, the Kremlin's top foreign policy advisor Yury Ushakov told a conference call: "Hysteria has reached its peak."
Weeks of tensions that have seen Russia nearly surround its western neighbour with more than 100,000 troops intensified after Washington warned that an all-out invasion could begin "any day" and Russia launched its biggest naval drills in years across the Black Sea.
Asian equities struggled on Monday. The Nikkei 225 in Tokyo ended 2.2% lower, the Shanghai Composite ended down 1.0%, while the Hang Seng in Hong Kong was down 1.4% in late trade. The S&P/ASX 200 in Sydney, however, advanced 0.2%.
In the US on Friday, the Dow Jones Industrial Average fell 1.4%, the S&P 500 closed down 1.9% and the Nasdaq Composite fell 2.8%.
Oil prices got a boost, however. A barrel of Brent fetched USD95.42 early Monday, up from USD93.16 late Friday.
The pound was quoted at USD1.3537 early Monday, down from USD1.3601 on Friday. The euro fetched USD1.1347, down from USD1.1406. Against the yen, the buck fell to JPY115.38 from JPY115.89.
Analysts at Danske Bank added: "It remains quite unclear as to what is geopolitical grandeur and what is reality on both sides of the conflict. In addition, politicians across EU and US have had calls with president Putin - generally without appearance of progress. Following the increasing concerns about an imminent conflict, EUR/RUB went higher together with oil prices and EUR/USD lower. Needless to say, if conflict becomes public and evident, there will be a substantial sell-off in RUB and we think the news flow since Friday does suggest an escalation of the risk premium embedded in RUB."
Safe haven asset gold was quoted at USD1,853.70 an ounce early Monday, up from USD1,834.21 on Friday.
The US escalation of the war threat level on Friday came as markets continued to digest inflationary fears.
CMC's Hewson added: "At the weekend, Mary Daly of the San Francisco Fed was slightly more cautious saying a too aggressive approach to monetary policy could be destabilising all by itself. This caution also chimed with comments at the end of last week, from Loretta Mester of the Cleveland Fed and Raphael Bostic of the Atlanta Fed, who expressed reservations about a 50bps move, although they were both careful not to rule it out."
In London, Synthomer said it saw "strong trading across all divisions" during 2021.
It expects annual earnings before interest, tax, depreciation and amortisation to roughly double to GBP518.4 million from GBP259.4 million in 2020. The figure would be in line with current market expectations.
Synthomer said that in its nitrile butadiene rubber business, margins have normalised to pre-virus levels.
However, demand at the unit remains "subdued" due to high inventory levels of medical gloves. NBR is frequently used in latex and surgical gloves.
"Trading conditions in NBR are expected to normalise by the end of H1 with market growth returning to 2019 levels in the second half," Synthomer said.
"All other divisions have had an encouraging start to the year."
John Menzies suitor Agility Public Warehouse backed its 150 pence per share offer for the company.
The Kuwaiti logistics company had made a cash offer for the aviation services firm via its holding subsidiary, National Aviation Services Holding, on February 2.
"NAS sees no reason to change its view on valuation and continues to view its improved possible cash offer of 510 pence per share as a full and fair price relative to the information Menzies has provided to the market on its current business and prospects," Agility said.
The offer, which Menzies has labelled as "entirely opportunistic", followed a 460p approach in January.
Agility on Monday said the 510p offer reflects the assumption that Menzies will see revenue recover to pre-virus levels by "early 2023". It also takes into account margin forecasts and the benefit of cost savings at the Main Market listed company, as well as government support received under Covid-19 schemes.
Agility added: "As a successful strategic operator in the aviation services sector, NAS has a clear and detailed view on the challenges and opportunities present in the sector as it recovers from the pandemic and has framed its analysis on that basis.
"Menzies' board and management team have chosen not to engage with NAS or share any information to corroborate their differing views on the company and industry, and therefore valuation. NAS sees no reason to change its view on valuation and continues to view its improved possible cash offer of 510 pence per share as a full and fair price relative to the information Menzies has provided to the market on its current business and prospects."
By Eric Cunha; ericcunha@alliancenews.com
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