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FTSE 100 Putin on the fritz


“Fears that oil supplies could be disrupted sent Brent crude 5% higher and European gas futures rose by more than 60%,” observed Hussein Sayed, the chief market strategist at Exinity.

  • FTSE 100 plunges 105 points
  • Polymetal and Evraz hammered
  • Banks tumble after Russian banks are excluded from the SWIFT payment system

There are some massive losers on the FTSE 100 headed by companies with strong Russian connections, while banks are also getting a kicking.

London’s index of heavyweight shares is down 105 points (1.4%) at 7,384.

Polymetal International PLC (LSE:POLY) has plummeted 54% to 367.5p and Evraz PLC (LSE:EVR) has plunged 26% to 150.7p as the rouble plunges following the imposition of sanctions over the weekend.

“The Russian ruble plunged by almost 30% to trade at a new record low of 106 ruble per dollar after Western countries blocked a list of Russian banks from the SWIFT global payment system,” observed Hussein Sayed, the chief market strategist at Exinity.

European banks are tanking after the West oxymoronically stopped dragging its feet on expelling Russian banks from the SWIFT system.

In London, HSBC PLC (LSE:HSBA) is down 4.9% at 511.4p, Natwest Group PLC is 4.5% lower at 225.1p, Lloyds Banking Group PLC (LSE:LLOY) is off 4.1% at 47.65p and Barclays PLC (LSE:BARC) is 4.3% weaker at 180.78p.

“Fears that oil supplies could be disrupted sent Brent crude 5% higher and European gas futures rose by more than 60%. The decision to cut Russia from the global payment system could possibly halt gas supplies to Europe and lead to dangerous economic consequences on the continent and the rest of the world,” Sayed added.

Victoria Scholar, the head of investment at interactive investor, noted that BP PLC (LSE:BP.) has shed 7% after announcing plans to divest its 19.75% stake in Russian oil giant Rosneft (AIM:ROSN), costing the British oil giant up to US$25 billion as the company’s chief executive officer (CEO) Bernard Looney steps down from Rosneft (AIM:ROSN)’s board.

“BP’s potential US$25 billion from exiting Rosneft highlights the stress facing companies with heavy exposure to Russia. It is becoming clear that attempts by the US and Europe to disentangle itself from Russia and freeze out its economy will have significant consequences for Western companies and economies too; however the downside for BP was capped by sharp gains in oil prices, which should continue to support its bottom line if Brent continues its upward trajectory,” she noted.

The price of Brent crude is currently US$4.94 (5.2%) higher at US$99.04 a barrel. Feel free to nip out and fill up the tank (unless you have an electric vehicle) after reading this update.

8.20am: Could’ve been worse (for the markets)

It was a sharp fall at the open, but not quite the decline predicted.

The FTSE 100 started 70 points in the hole at 7,422.55 after a weekend of further conflict in Ukraine that was coupled with some Putin sabre rattling as Russia put its nuclear forces on high alert.

All this could be moot if border talks between delegates from Moscow and Kyiv yield some sort of ceasefire.

Ramped up sanctions have heavily hit the rouble, while Russia has more than doubled its interest rates.

The country’s effective expulsion from the banking communications system Swift has the potential to hit it hard financially too.

On the market, BP shares were 4% lower in the opening exchanges after the oil giant said it would be getting rid of its 20% stake in the Russian state-owned oiler Rosneft (AIM:ROSN).  

6.55 am: Nuclear wobbles predicted 

The FTSE 100 looks set to open sharply lower after Russia’s Vladimir Putin put the country’s nuclear deterrent force on high alert.

This was the latest worrying twist in the Ukraine conflict with blasts heard in the country’s capital Kyiv and second city Kharkiv overnight.

The powder keg atmosphere is unlikely to lend itself to a constructive exchange between delegates from Russia and Ukraine, who are expected to meet on the northern border with Belarus later today.

With new sanctions imposed, including Russia’s removal from the Swift secure messaging system for banking, the rouble has crashed to a record low of one US cent, while Brent crude remained above US$100 a barrel. Goldman Sachs (NYSE:GS) warned over the weekend oil prices could hit US$125.

BP, meanwhile, has said it will offload its near 20% stake in Russia’s state-owned oil giant Rosneft (AIM:ROSN).

“There are no good outcomes to this crisis,” warned Neil Wilson, analyst at Markets.com.

“Either Russia wins what would now be a very bloody war (as opposed to the quick Blitzkrieg), and Russian tanks are parked on Nato’s eastern flank with Putin emboldened.

“Or, we need to think of the consequences of Russia losing this war; Putin chased back to his dacha, badly beaten?

“What does the cornered bear do then? We are in uncharted territory with a hot war in Europe where one of the protagonists has nuclear weapons.

“We pin our hopes on talks leading to an end to the bloodshed on both sides…but the geopolitical order is becoming more spiky.”

Around the markets

  • Pound US$1.3361 (-0.36%)
  • Bitcoin US$37,761.40 (+0.12%)
  • Gold US$1,911.90 (+1.29%)
  • Brent crude US$102.62 (+4.79%)

6.50am: Early Markets – Asia / Australia

Asia Pacific markets were mixed on Monday as the U.S. and Western allies announced fresh sanctions on Russia, prompting fears that energy supplies will be affected.

Brent crude, the international oil benchmark, gained about 5% to trade at US$105 per barrel.

The Russian rouble dropped to as low as 119 per US dollar in early trading, tumbling beyond its previous low of 90 roubles per US dollar. It was last trading at 105.

Japan’s Nikkei 225 gained 0.19% and South Korea’s Kospi rose 0.84%.

The Shanghai Composite in China lifted 0.13% while Hong Kong’s Hang Seng index dipped 0.87%.

Australia’s S&P/ASX200 ended the day 0.7% higher and ended the month up 1.1% after interim earnings showed the resilience of the traditional pillars of the economy – mining, resources and banking.


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