As Russian tanks rolled through Ukraine, the FTSE 100 sank to a two-month low, taking losses since its peak a fortnight ago to almost 6%. Our City writer rounds up the day’s activity.
There was nowhere for investors to hide today as more than a quarter of stocks in the FTSE 100 index tumbled by 5% or more in the wake of Russia's invasion of Ukraine.
Rolls-Royce Holdings (LSE:RR.), Lloyds Banking Group (LSE:LLOY) and BP (LSE:BP.) were among the popular stocks most under pressure as the FTSE 100 index repeated the Covid-19 slide of 3% seen exactly two years ago today.
As well as uncertainty about how the West will respond to Russian aggression, financial markets are fearful that the world's inflation crisis is about to deepen as oil prices spiral.
Russia's pivotal role in the global energy market today pushed the price of Brent crude above $105 a barrel, potentially choking off the economy's pandemic recovery. Unsurprisingly, safe haven assets such as the US dollar, government bonds and gold all rallied.
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How long this de-risking lasts depends on the next moves in Ukraine, but Capital Economics warns that a further fall for equities of 10-20% is quite plausible based on the 20-25% drop for global stock market indices seen after Iraq invaded Kuwait in 1990.
It said that a key factor will be how central banks respond, given that stock markets were already fearful of rising interest rates prior to the escalation of the Ukraine situation. The consultancy said: “If the conflict prompts policymakers to hold off, or at least slow down, the tightening process, that may cushion the blow to risky assets.”
UBS Global Wealth Management expects further volatility in the near term, but says it is in Russia's economic interest to continue selling its energy and other commodity exports to Europe, given that 36.5% of all its imports and 37.9% of exports are with the EU. It said: “The importance of this trade relationship could weigh against a long-lasting military engagement.”
As always at times of heavy selling pressure, the best advice for retail investors is to stay calm and to avoid being panicked into moves that may lead to losses being crystallised.
For now, almost all portfolios have been shredded, with the valuations of some popular stocks going full circle to revisit the levels seen at the onset of the pandemic in spring 2020. Examples include Rolls-Royce, which today fell 21p to 96.7p as the rebuilding job that helped the engine giant's shares trade near 150p in September is rapidly dismantled.
The Rolls sell-off, which wasn't helped by the resignation plans of chief executive Warren East, came as investors dumped stocks with exposure to global travel and high fuel prices.
The latest setback in its protracted turnaround battle left British Airways owner International Consolidated Airlines (LSE:IAG) 13.7p lower at 143.3p, while easyJet (LSE:EZJ) and eastern Europe-focused carrier Wizz Air Holdings (LSE:WIZZ) lost 7% and 14% respectively in the FTSE 250 index.
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Banks have been hit particularly hard by the Ukraine developments, particularly those in Europe with significant lending exposure to Russian companies. That's not the case for Lloyds but shares still tumbled 4.8p to 47.4p on fears that today's much-improved results will be as good as it gets for the lender if the UK economy goes into reverse.
Only last month, the bank's army of small shareholders were looking on the bright side after shares touched 55p for the first time since the pandemic sell-off.
Unsurprisingly, Polymetal International (LSE:POLY) and Roman Abramovich-backed steel producer EVRAZ (LSE:EVR) fared the worst of all in the FTSE 100 index today as investors calculated the potential economic hit from further sanctions against Russia.
Polymetal, which is Russia's second largest gold producer, dived 392.1p to 705.4p to its lowest level since 2018. Evraz, which is a steel, mining and vanadium business, lost a third of its value to trade at a near six-year low.
Like Polymetal, the rising gold price failed to protect shares in Russia and Kazakhstan focused precious metal miner Petropavlovsk (LSE:POG). Their performances were in keeping with the main Moscow stock market index, which tumbled 45% to its lowest level since January 2016.
Other London-listed mining stocks got a lift from gold's surge in price to more than $1,950 an ounce. Beneficiaries included Peru's Hochschild Mining (LSE:HOC) and the Egypt-focused miner Centamin (LSE:CEY) as its FTSE 250 shares topped 100p for the first time since November.
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Russia is a big player in industrial metals, particularly aluminium, nickel and palladium, with today's upward impact on the prices of these metals helping to shore up stock market valuations for key producers such as Anglo American (LSE:AAL) and Glencore (LSE:GLEN).
Shell (LSE:SHEL) was one of only five stocks in positive territory in the top flight, but BP's 20% stake in Russian oil producer Rosneft meant its shares were down 13.8p to 369p. The oil giant had been as high as 417p in the aftermath of its full-year results earlier this month.
The potential boost to defence spending gave a further lift to BAE Systems (LSE:BA.) shares on top of the company's annual results today, with the flight to safety also helping to ensure steady sessions for the likes of United Utilities Group (LSE:UU.) and Rentokil Initial (LSE:RTO).
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