LONDON MARKET CLOSE: Russia conflict fears thwart markets once more

Fri, 04th Mar 2022 16:54

(Alliance News) - European stocks faced heavy selling pressure once again on Friday, as a difficult week for equities ended on a sour note on fears of nuclear risks as Russia's invasion of Ukraine continues.

Russian forces seized control of Europe's largest nuclear power plant on Friday after a battle with Ukrainian troops that caused a fire and fears of a catastrophic accident.

The FTSE 100 index ended down 251.71 points, or 3.5%, at 6,987.14 on Friday. The blue-chip index has lost 6.7% this week and closed below the 7,000 point threshold for the first time since October.

The mid-cap FTSE 250 index closed down 692.02 points, or 3.5%, at 19,387.68. The AIM All-Share index ended down 33.57 points, or 3.3%, at 971.07. The AIM closed below the 1,000 point mark for the first time since November.

Over the course of the week, the FTSE 250 fell 7.3%, while the AIM lost 5.8%.

The Cboe UK 100 index closed down 3.2% at 697.61. The Cboe 250 ended down 3.8% at 17,065.13, and the Cboe Small Companies closed down 3.0% at 14,141.20.

In mainland Europe, the CAC 40 in Paris slumped 5.0%, while the DAX 40 in Frankfurt tumbled 4.4%.

Ukraine accused the Kremlin of "nuclear terror" and the West expressed horror on Friday, after Europe's largest atomic power plant was attacked and taken over by invading Russian forces.

Blasts lit up the night sky as the plant at Zaporizhzhia came under shell fire, while Russian troops advanced in southern Ukraine and bombarded several cities elsewhere.

The euro has been badly-hit by the conflict. The single currency fell to an intraday low of USD1.0886 on Friday, its weakest level since May 2020.

It perked up somewhat to close at USD1.0915 at the European equities close on Friday, though still down from USD1.1047 on Thursday.

In addition, the euro fell ever closer to parity with the Swiss franc, trading at CHF1.003 at the time of the European equities close, its weakest level since 2015.

The pound also struggled, falling markedly to USD1.3215 late Friday from USD1.3341 on Thursday. Despite falling to USD1.3203 on Friday, sterling kept itself above the USD1.32 mark, a threshold it has not fallen below since December.

Against the yen, the dollar was trading at JPY114.76, lower against JPY115.63, with a flock to safety boosting the Japanese currency.

Risk aversion also boosted gold. The precious metal stood at USD1,961.27 an ounce late Friday, higher from USD1,928.05 late Thursday.

It was a session for equities, meanwhile.

CMC Markets analyst Michael Hewson commented: "Investors have piled out of European stocks this week, accelerating a decline that began at the end of last month, and has accelerated over the last two days. This morning's reckless shelling of a Ukrainian nuclear power plant by Russian forces, shows that Putin is becoming increasingly desperate to obtain a victory in the face of numerous setbacks, and with little sign that he is inclined to back down. If anything, the stubbornness of Ukrainian forces is enraging him further, in turn raising the uncertainty level further.

"These actions are a significant escalation and raise the question as to whether Putin could adopt a scorched earth policy in his attempts to crush Ukrainian resistance. Fears of further escalations, on top of rising inflationary risks putting pressure on European companies' margins, as well as future profits, and has seen the DAX slide to its lowest levels since December 2020."

Broad-based declines heaped even more pressure on the FTSE on Friday.

Packaging firms Mondi and Smurfit lost 6.6% and 8.0%, as traders fret over their exposure to Russia.

A Brent price rise was not enough to shield Shell, the oil major lost 5.0%.

Brent oil was quoted at USD114.52 late Friday, up from USD113.62 on Thursday.

British Airways parent International Consolidated Airlines Group fell 5.5%. The conflict may sap demand for travel, lift jet fuel prices and add to inflationary pressures for consumers.

Consumer spending-related fears also hit the retail sector. Sofa sellers Made.com and DFS fell 5.6% and 11%, while luxury retailer Burberry shed 8.4%, one of the worst blue-chip performers.

Paris-listed luxury goods peer Hermes has temporarily closed its shops in Russia and paused its commercial activities there. The group runs three stores in Russia, including one in the Gum department store on Red Square in Moscow, and employs 60 people in the country.

Hermes shares closed 3.7% lower in Paris.

Microsoft said it is halting new sales of its products and services in Russia, in the latest fallout over Moscow's invasion of Ukraine.

The US-based tech company, behind software that runs on over one billion devices, said it would "suspend all new sales of Microsoft products and services" in Russia, but offered no further details.

Microsoft shares were 2.7% lower in New York.

Markets on Wall Street struggled as the ongoing conflict continued to hurt sentiment. At the time of the closing bell in London, the Dow Jones Industrial Average was down 1.4%, the S&P 500 1.5% lower, while the Nasdaq Composite tumbled 2.0%.

Traders were also mindful of the latest US nonfarm payrolls report, and the consequences it could have on monetary policy.

The US economy added significantly more jobs than expected in February, giving the Federal Reserve more leeway to raise interest rates.

According to the Bureau of Labor Statistics, nonfarm payroll employment rose by 678,000 in February - beating expectations, cited by FXStreet, of 400,000 new jobs.

Analysts at ING commented: "Given strong hiring intentions, this will keep upward pressure on pay with the Federal Reserve set to respond with higher interest rates despite uncertainty created by Russia's assault on Ukraine."

Monday's economic calendar has the latest UK Halifax house price index at 0700 GMT. The week picks up pace with a eurozone gross domestic product reading on Tuesday, inflation data from China on Wednesday and the European Central Bank's latest interest rate decision on Thursday.

The local corporate calendar has annual results from cloud video editing platform Blackbird and renewable energy investor Downing Renewables & Infrastructure Trust. FTSE 250-listed HgCapital Trust, which participates in the private equity investments of manager Hg, also reports full-year number on Monday.

By Eric Cunha; ericcunha@alliancenews.com