LONDON MARKET OPEN: Hope for military stand down lifts stocks

(Alliance News) -London share prices opened higher on Tuesday, in what was a calmer batch of early dealings compared to Monday's conflict-driven sell-offs.

The FTSE 100 index was up 70.68 points, or 0.9%, at 7,602.57 early Tuesday. The mid-cap FTSE 250 index was up 74.47 points, or 0.3%, at 21,692.36. The AIM All-Share index was up 3.22 points, or 0.3%, at 1,067.99.

The Cboe UK 100 index was up 1.1% at 755.20. The Cboe 250 was up 0.3% at 19,415.62, and the Cboe Small Companies up 0.1% at 15,449.93.

In mainland Europe, the CAC 40 in Paris surged 1.6%, while the DAX 40 in Frankfurt was 0.6% higher.

Stocks in New York closed largely lower on Monday, and the handover from Asia also was mostly negative on Tuesday, suggesting markets continue to be unnerved by geopolitical tensions and inflationary worries.

Hints of lowered tensions on the Russia-Ukraine border have been supportive for European equities in early trading.

Interactive Investor analyst Richard Hunter commented: "Mixed reports on the escalating tensions between Russia and concerned nations have suggested that on the one hand, the threat of an invasion is nearing, yet hopes for a diplomatic solution are not yet exhausted."

Russia held the door open Monday to further talks on resolving its standoff with the West and said some of its military drills were ending, signalling a possible easing of the crisis over Ukraine.

As Western intelligence officials warned Wednesday could mark the start of an invasion, Ukrainian President Volodymyr Zelensky announced on national television the day would be marked as 'Unity Day'.

While the comments from President Vladimir Putin and his foreign and defence ministers seemed to offer hope of a de-escalation, the Pentagon said Russian forces on the border with Ukraine were still growing.

In Asia on Tuesday, Tokyo's Nikkei 225 closed down 0.8%, while the S&P/ASX 200 fell 0.5%. The Shanghai Composite added 0.5%, though the Hang Seng in Hong Kong ended 0.8% lower.

In New York, the Dow Jones Industrial Average closed down 0.5%, and the S&P 500 lost 0.4%, while the Nasdaq Composite ended flat.

The dollar's gains on the pound and euro faded early Tuesday. Sterling was quoted at USD1.3559, firm on USD1.3520 late Monday. The euro stood at USD1.1336, up from USD1.1300. Against the safe-haven yen, the greenback was marginally lower at JPY115.55 from JPY115.58.

St Louis Fed President James Bullard said the US central bank needs to accelerate the pace of interest rate increases to fight rising inflation, but can do so in a way that doesn't roil financial markets.

"Our credibility is on the line here," Bullard said on CNBC. After consumer prices saw their biggest jump in 40 years in January, he said the Fed should "front load" its actions and raise the benchmark borrowing rate to one percent by July.

Bullard, a voting member of the Fed's policy-setting committee, caused a sharp reaction by markets last week with similar comments on the need to remove stimulus from the economy provided during the Covid-19 pandemic.

The Bank of England also was in focus after the latest batch of UK unemployment and wage data.

In the three months to December, the UK unemployment rate was steady at 4.1%, in line with market expectations. The jobless rate in the three months to November also was 4.1%.

Annual growth in total pay - so including bonuses - was 4.3%. Regular pay, which excludes bonuses, was up 3.7%. Both failed to keep pace with the UK's annual consumer price inflation rate in December of 5.4%, however.

"With the UK jobs market in decent shape, expect another two rate rises from the Bank of England in quick succession," analysts at Dutch bank ING commented.

Still to come on the economic calendar on Tuesday are eurozone GDP figures at 1000 GMT and US producer prices at 1330 GMT.

Brent oil was quoted at USD95.02 a barrel early Tuesday, up from USD94.70 a barrel late Monday. The North Sea benchmark hit USD96.74 a barrel on Monday, its best level since late-September 2014.

Gold stood at USD1,869.98 an ounce, up from USD1,865.30. The precious metal faded from USD1,879.44 earlier on Tuesday, its best level since June.

In London, Russian steel maker Evraz was 2.4% higher in early dealings, clawing back some of Monday's hefty 29% share price decline.

Glencore rose 3.9%. The miner unveiled a bumper shareholder return alongside strong 2021 profit growth, though it also said it has taken USD1.50 billion aside as a provision for a litany of regulatory investigations.

Revenue for 2021 grew 43% to USD203.75 billion from USD142.34 billion in 2020. This helped the firm swing to a pretax profit of USD7.38 billion from a loss of USD5.12 billion the year before.

Chief Executive Gary Nagle said: "The significant improvement in the group's financial results has driven net debt down to USD6.0 billion, allowing for today's announcement of USD4.0 billion of shareholder returns."

Of this bumper shareholder return, USD3.4 billion will comprise of a USD0.26 per share base distribution in respect to 2021 cash flow, and USD550 million through a share buyback. Glencore did not pay a dividend in 2020.

The miner, however, had to set aside a USD1.50 billion provision for probes involving the US Department of Justice, the US Commodity Futures Trading Commission, the UK Serious Fraud Office, and the Brazilian Federal Prosecutor's Office.

The US DoJ is investigating Glencore's compliance with various criminal statutes, including money laundering and fraud laws. The CFTC's probe is in connection with charges of market manipulation in commodities trading, while the UK and Brazil probes both are in connection with alleged bribery, the latter concerning Petrobras. Petrobras is a Brazilian state-owned petroleum company.

On AIM, Kazera Global shares surged 13%.

The investment company focused on mining of minerals such as tantalum and diamonds in Nambia, posted record output for the most recent production cycle, which spanned December to January.

Diamond production during the period reached 1,000 carats, markedly ahead of the previous record of 242 carats.

"The batch contains a number of larger diamonds, the largest being 13 carats," Kazera said.

MySale tumbled 39%. The Australia, New Zealand and south east Asia-focused online retailer said revenue in the six months to December 31 fell 6.4% to AUD59.7 million, about GBP31.5 million, from AUD63.8 million.

Supply chain difficulties, meanwhile, hit profit. Underlying earnings before interest, tax, depreciation and amortisation fell to AUD1.0 million from AUD2.5 million.

"During H1 FY22, in line with the company's strategy, management took the decision to invest in additional own-buy inventory. However, the subdued demand, driven by the speed of the spread of the Omicron variant in Australia, and delays in stock deliveries prior to Christmas meant that inventory built up to a higher level than expected," MySale said.

Inventory balance surged to AUD6.1 million from AUD2.6 million a year earlier. Cash balance tumbled to AUD3.8 million from AUD15.8 million.

MySale is now taking a "cautious" approach to its annual outlook.

Elsewhere on AIM, Audioboom continued to rise. The stock was up 1.6% at 1,980.22 pence each, implying a market capitalisation of GBP312.20 million.

Amazon and Spotify are both considering making bids to acquire the podcast producer, Sky News reported over the weekend. Audioboom shares had risen 11% on Monday.

By Eric Cunha; ericcunha@alliancenews.com

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