LONDON MARKET MIDDAY: Sell off around Europe continues as war rages

(Alliance News) - European markets continued in free-fall on Friday, as the war in Ukraine continued to cause panic selling, with investors also awaiting the US nonfarm payrolls report for February.

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.

An explosion at Zaporizhzhia would have equalled "six Chernobyls", Ukrainian President Volodymr Zelensky said, referring to the plant in Ukraine that was the site of the world's worst nuclear disaster in 1986.

The FTSE 100 index was down 222.03 points, or 3.1%, at 7,015.43 midday Friday - adding to Thursday's 2.6% drop. The blue-chip index is down 6.4% so far this week.

The mid-cap FTSE 250 index was down 574.70 points, or 2.9%, at 19,505.00, on top of Thursday's 3.4% decline. The AIM All-Share index was down 28.55 points, or 2.8%, at 976.09.

The Cboe UK 100 index was down 3.0% at 698.65. The Cboe 250 was down 3.2% at 17,166.14, and the Cboe Small Companies down 2.4% at 14,220.19.

In mainland Europe, the CAC 40 in Paris and the DAX 40 in Frankfurt were both 3.2% lower.

"With the invasion of Ukraine by Russia now into its second week, stock markets continue to battle the threat of even higher inflation and a potential economic slowdown," Russ Mould, investment director at AJ Bell, said.

"Soaring commodity prices imply the cost of living is going up again, and it affects people around the world. If costs are going up again, corporates must either stomach lower profit margins or risk passing on the costs to the end user. At some point soon consumers will not be able to cope with even higher prices, so corporates face a big demand test."

Banks in London were suffering from the risk-averse mood. HSBC shed 5.1%, Lloyds 4.9%, Barclays 5.3%, and NatWest 3.5%.

Travel stocks were also in the red, with British Airways-owner, International Consolidated Airline Group down 5.0%, and Rolls Royce, with its large aerospace businesses, down 5.9%.

Mondi shed 5.0%. Susannah Streeter, senior investment and markets analyst at Hargreaves Lansdown, said investors are fretting about the packaging firm's exposure to the conflict.

"It's already suspended production at a plant in Ukraine, but it's the fate of its Russian plant, Syktyvkar, which accounted for 12% of the group's revenue in 2020, which is causing concern, given that finding a buyer for the site will be nigh on impossible right now," Streeter said.

Among the few green shoots in the FTSE 100, Russian-linked firms Evraz and Polymetal International were staging a small recovery amid some bargain hunting - advancing 20% and 23% on Friday. This week, Evraz has shed 62% and Polymetal slumped 55%.

Both companies were demoted from the FTSE 100 as part of the latest index review changes after collapsing in value since Russia launched its attack on Ukraine.

Mexican precious metals miner Fresnillo gained 5.1%, benefiting from continued high commodity prices. Midcap miners Hochschild and Centamin added 3.7% and 1.7%, respectively.

Gold stood at USD1,946.20 an ounce midday Friday, higher from USD1,928.05 late Thursday. Brent oil was quoted at USD112.64, down from USD113.62 late Thursday. It had hit an intraday high of USD119.84 on Thursday.

HL's Streeter said: "Commodities are on a seemingly unstoppable march upwards, adding to fears that the conflict will damage global growth as import costs rise dramatically and companies and consumers are forced to take big hits on their budgets.

"A closely watched barometer for raw materials, the S&P GSCI index, has leapt by more than 15% in just a week, with little sign that prices will ease anytime soon. The cost of wheat has rocketed with contracts traded in Chicago up by 40% over the last seven days. That is piling the pressure on food producers who are also having to cope with higher transport and logistics costs."

Back in London, Morgan Advanced Materials advanced 11%.

The Windsor, England-based industrial products manufacturer reported it had swung to profit in its full year, as its restructuring process paid off and margins were at their highest in decades.

Morgan Advanced swung to a pretax profit of GBP104.3 million in 2021, up from a loss of GBP13.1 million in 2020. This was strong progress towards recovering pre-pandemic profit of GBP109.7 million in 2019, coming just 4.9% short.

Revenue was up 4.4% to GBP950.5 million from GBP910.7 million. On an organic constant currency basis, revenue grew 10%, ahead of the company's November guidance of a range of 7% to 9% growth. This figure however was 9.5% behind the GBP1.05 billion achieved in 2019.

Morgan Advanced said demand had recovered over 2021, following the "sharp slowdown" in 2020, but the recovery of demand and the pandemic caused supply chain disruption and inflated costs of materials and labour.

The pound was quoted at USD1.3287 midday Friday, down from USD1.3341 at the London equities close Thursday.

The euro was priced at USD1.0978, down from USD1.1047. Against the yen, the dollar was trading at JPY115.39, lower against JPY115.63.

Looking ahead, New York was pointed to a lower open ahead the monthly jobs report at 1330 GMT.

The Dow Jones Industrial Average was called down 0.7%, the S&P 500 down 0.8% and the Nasdaq Composite down 0.7%.

Pierre Veyret, an analyst at ActivTrades, said: "Investors may remain patient this morning as a crucial US non-farm payroll data for February is looming in the afternoon, which may provide investors with more clues about the real shape of the US economy as well as the next monetary moves from the Fed, even though a quarter basis point rate hike is now fully priced in."

XTB Markets Chief Market Analyst Walid Koudmani said the report is expected to show an increase of 440,000 jobs.

By Paul McGowan; paulmcgowan@alliancenews.com

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