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(Alliance News) - European stocks raced ahead at the open on Wednesday with the confirmation of a ban on Russian oil not sapping renewed investor optimism.
The US and UK announced Tuesday they are cutting off imports of Russian oil, in the most far-reaching action yet by Western allies to punish Moscow for invading Ukraine.
The moves mark a crucial escalation in international sanctions against Russia. Western allies had initially omitted energy, a crucial source of revenue for President Vladimir Putin's government, from an array of economic penalties imposed in response to the attack.
"The oil price rose again on prospects of diminishing supply and now stands ahead by 68% in the year to date. With the EU also looking to end its reliance on Russian gas, the near-term prospects for inflation remain extremely high and on top of what were already elevated levels. In the meantime, there is clearly a scramble for replacement supplies which extends beyond energy to the likes of metals and food in some areas," Richard Hunter, head of Markets at interactive investor, said.
Despite ongoing 'stagflation' concerns, major European indices advanced.
The FTSE 100 index was up 120.33 points, or 1.7%, at 7,084.48 early Wednesday. The mid-cap FTSE 250 index was up 489.48 points, or 2.6%, at 19,707.10. The AIM All-Share index was up 9.57 points, or 1.0%, at 972.82.
The Cboe UK 100 index was up 1.6% at 705.99. The Cboe 250 was up 2.4% at 17,322.89, and the Cboe Small Companies up 1.5% at 14,358.12.
In mainland Europe, the CAC 40 in Paris was up 3.6% and the DAX 40 in Frankfurt up 3.8%.
Hunter added: "The UK’s premier index continues to be buffeted by volatility, not immune from the wider weakness of sentiment, yet underpinned to an extent by its exposure to the oil and mining sectors. Another attempt at retaining some of its recently lost ground was made in early opening exchanges, with a further pop in insurance shares and financials generally providing extra support.
"Despite clawing back some of its losses, the FTSE 100 remains down by 4.2% in the year to date. As with markets globally, the apparent lack of light at the end of the tunnel in terms of the conflict is keeping a firm lid on sentiment."
Brent oil was quoted at USD129.82 a barrel on Wednesday morning in London, slipping from USD132.65 late Tuesday, though still elevated.
Gold stood at USD2,046.10 an ounce early Wednesday, down from USD2,056.80 late Tuesday.
In London, both Evraz and Polymetal International jumped at the open after the Russia-linked firms said they are not the object of any sanctions imposed on Russia, thus far. They said the sanctions have not hurt daily operations.
Evraz was up 14% and Polymetal up 43%. Evraz remains down 85% so far in 2022, while Polymetal is down 90%.
Fellow Russian miner Petropavlovsk also noted its operations, which are located in the Far East of Russia, currently continue without interruption.
Petropavlovsk continues to sell gold, as before, to domestic commercial banks at London fixing and is therefore not affected by export controls at this time, it added. It also noted it has sufficient funds available to service its current debt.
It was up 23% in the FTSE 250, though remains down 81% in 2022.
Prudential was up 6.8% in the FTSE 100.
It reported "high-quality, resilient growth" as the Asia-focused insurer saw new business profit rise by a double-digit percentage.
For 2021, pretax profit slipped to USD3.02 billion from USD3.18 billion in 2020. New business profit rose by 13%, however, to USD2.53 billion from USD2.20 billion.
EEV operating profit increased 4% to USD3.54 billion from USD3.40 billion.
Total revenue, net of reinsurance, dropped to USD26.50 billion from USD36.25 billion. Gross premiums earned rose to USD24.22 billion from USD23.50 billion, but Pru saw a marked drop in investment return of USD3.49 billion from USD13.76 billion.
Annual premium equivalents grew 8% to USD4.19 billion from USD3.81 billion.
Present value of new business premiums rose 12% to USD24.15 billion from USD21.59 billion.
Legal & General advanced 4.5% after it delivered operating profit in line with internal guidance for 2021, with all of the firm's contributing to the "resilient" performance.
"This marks a return to our long-term rate of growth, having been resilient through the pandemic. Our diversified business model benefitted from the post pandemic economic recovery and easing of restrictions over 2021 to deliver strong earnings. All five businesses are well positioned to execute on compelling structural market opportunities to deliver further profitable growth," L&G said.
For 2021, operating profit was up 2% to GBP2.26 billion from GBP2.22 billion in 2020. Excluding mortality releases, operating profit rose 11%, which was in line with company guidance issued with its interim results.
L&G declared a full-year dividend of 18.45 pence, rising from 17.57p in 2020.
Solvency II coverage ratio rose to 187% from 175% at the end of 2020. L&G "estimated" its coverage ratio had risen to 198% by the start of this week.
Network International Holdings was sitting atop the FTSE 250, up 13%.
The payment solutions provider's profit surged to USD56.6 million in 2021 from USD5.6 million in 2020. Revenue jumped 24% to USD352.2 million from USD284.8 million.
Total processed volume rose 28% to USD42.81 billion, as the total number of transactions increased 29% to 979.9 million from 758.1 million.
"We are encouraged by the momentum we saw in 2021 and the recovery of our business from the pandemic, which has continued into 2022," the company said.
Looking ahead, it has guided for 27% to 29% revenue growth in 2022.
Stagecoach was driven 36% higher after it walked away from its all-share merger with larger UK peer National Express, opting for a cash offer instead.
National Express was 7.7% higher.
The Perth, Scotland-based bus and train operator on Wednesday said its directors unanimously recommend a new GBP594.9 million cash offer from Pan-European Infrastructure III SCSp, an infrastructure fund managed and advised by DWS Infrastructure.
They no longer recommend a previously agreed all-share merger with Birmingham-based National Express. That deal, struck back in December, would have created a GBP1.9 billion market-cap public transport provider, though it was being reviewed by the UK Competition & Markets Authority.
DWS will offer Stagecoach shareholders 105 pence in cash, which is a 37% premium to its closing price on Tuesday.
The pound was quoted at USD1.3139 early Wednesday, firm on USD1.3110 at the London equities close Tuesday.
The euro was priced at USD1.0952, up from USD1.0890. Against the yen, the dollar was trading at JPY115.77, up from JPY115.62.
In Asia on Tuesday, the Japanese Nikkei 225 index closed down 0.3%. In China, the Shanghai Composite ended 1.1% lower, while the Hang Seng index in Hong Kong closed down 0.7%. The S&P/ASX 200 in Sydney closed up 1.0%.
By Paul McGowan; paulmcgowan@alliancenews.com
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