FTSE 100 drops more than 3% and Wall Street set to plunge as Russia attacks Ukraine

• FTSE 100 falls 218 points
• BAE Systems in demand
• Polymetal and Evraz slump

1.11pm: Polymetal attempts to calm nerves

Polymetal International PLC (LSE:POLY) continues to be the biggest faller in the FTSE 100, despite the gold and silver miner responding to the attack on Ukraine.

It said all its operations in Russia and Kazakhstan continued as usual and the sanctions so far announced by the West have not affected the company.

It said: « The rapid deterioration in the situation in Ukraine has led to a material increase in possibility of additional and more severe sanctions to be imposed by the EU, the UK and the US. The scope and impact of these new potential sanctions (and any potential counter-sanctions) is yet unknown, however they might affect key Russian financial institutions as well as mining companies

« Polymetal believes that targeted sanctions on the company remain unlikely. Contingency planning has been initiated proactively to ensure business continuity, including selection of key equipment suppliers, liquidity management, debt portfolio diversification and securing sales channels.

« Polymetal reiterates its production and cost guidance for 2022 and confirms release of its 2021 financial results on the 2nd of March 2022. »

The attempt to calm nerves does not seem to have helped. Its share are currently down 39.94%.

12.58pm: European market slide accelerates

The market falls are getting worse.

The FTSE 100 is now down 245.38 points or 3.27% at 7252.80.

In Europe Germany Dax has dropped 5.38% and France’s CAC has fallen 4.94%.

12.26pm: Markets await US GDP and jobless claims data

The economic data doesn’t stop just because there’s a war on, and there are some key US indicators due.

There is a revision to the fourth quarter GDP figure, which initially came in at 6.9% and ahead of forecasts of 5.5% as companies rebuilt their stock ahead of the Thanksgiving and Christmas periods.

Analysts expect a slight increase in the update to around 7%.

Meanwhile weekly jobless claims are forecast to fall from 248,000 to 225,000.

11.52am: US markets forecast to follow Europe lower

US stocks are expected to sharply lower after President Vladimir Putin ordered the start of military operations in eastern Ukraine and Russian forces commenced a multi-pronged attack on a number of cities in its neighbouring country.

Futures for the Dow Jones Industrial Average sank 2.5% in Thursday pre-market trading, while those for the broader S&P 500 index fell 2.53% and the tech-heavy Nasdaq shed 3.15%.

Safe-haven gold gained more than 3% to its highest level in over a year while Brent Crude Oil (LSE:BRENT) (Brent Crude Oil (LSE:BRENT)) rose above $100 for the first time since 2014 as energy prices surged on the offensive by Russia, one of the largest exporters of oil and gas.

US markets also ended Wednesday with sharp losses as the S&P 500 plunged deeper into the correction territory amid fears of the Ukraine-Russia war.

At the close, the S&P 500 lost 1.84% to 4,226, while the Nasdaq suffered heavy losses of 2.57% to 13,037. The Dow Jones declined by 1.38% to 33,132. 

Ipek Ozkardeskaya, senior analyst at Swissquote, said: “The combined revenue exposure of the S&P500 to Russia and Ukraine is only about 1%. It’s not much. Yet the rising energy and commodity prices are a growing threat for US equities as they will put further upside pressure on inflation and force the Federal Reserve’s hand to act more aggressively to tame the inflation. ».

Back in the UK, the FTSE 100 has fallen further, and is now down 218.31 points or 2.91% at 7279.87.

11.12am: Retail sales rise in February – CBI

Shoppers returned to the high street in February as COVID-19 restrictions eased, but selling prices continued to rise and the Ukraine conflict is likely to have an effect on future performance.

Retail sales volumes were above seasonal norms in February at +16%, according to the latest CBI Distributive Trends survey. The figure represents the weighted difference between the percentage of retailers reporting an increase and those reporting a decrease. 

That compares to a figure of -23% in January. But sales are expected to be just average in March at -1%%.

Retail selling prices continued to grow rapidly in the year to February (+75% from +77% in November) with a slight acceleration expected next month (+81%).  

Internet sales declined in the year to February (-11% from -2% in January), only the second time they have fallen in the survey’s history.

Martin Sartorius, principal economist at the CBI, said: “The easing of COVID-19 restrictions – including the end of work-from-home guidance – has, unsurprisingly, encouraged shoppers to return to the high streets. 

“There are other challenges facing retailers, however. Conflict in Ukraine means energy prices and transport costs will rise further, adding more pressure on retailers’ operating costs and biting into households’ spending power.” 

10.54am: Gas prices soar on supply fears

Gas prices as well as oil are soaring amid fears the conflict in Ukraine could disrupt energy supplies to Europe.

European prices jumped by around 40% while the UK day ahead contract rose 38% to £225 per mega watt hour.

10.17am: FTSE down but outperforming, Russian market plunges

Markets across Europe are in decline after the Russian move on Ukraine.

In the UK the FTSE 100 is now down 184.33 points or 2.46% at 7313.85 while the mid-cap FTSE 250 is off a remarkably similar amount, down 2.47% at 20,326.77.

But there are worse declines elsewhere. France’s CAC has fallen 3.71% and Germany’s Dax has lost 3.84%.

And no surprise which market is the worst performer.

Victoria Scholar, head of investment at interactive investor said: “Unsurprisingly the Russian market is taking the heaviest hit.

« The Russian MOEX equity market is down close to 40%, suffering its worst day on record. Meanwhile the Russian rouble has slumped to a record low against the US dollar with USD/RUB skyrocketing above 85 as the worst-case scenario plays out.

« With the prospect of heavier sanctions and other financial penalties, international investors have lost all confidence in Russian markets and Russia’s economy as President Putin proceeds undeterred with the military operation in Ukraine.”

9.41am: Soaring energy prices will stoke inflation further

The impact of the Russian attack on Ukraine is likely to hit equity markets for longer than people might have thought, says Russ Mould, investment director at AJ Bell.

He said: “The surge in the oil price is terrible news for businesses and consumers, and fundamentally this clarifies one of the key impacts of the Russia/Ukraine war – it will serve to further stoke inflation.

“Not only will energy bills keep going up, but food prices look set to jump even higher. Ukraine and Russia are both big food suppliers and any disruption to supplies will force buyers to seek alternative sources, which could jack up prices.

“Investor sentiment was already fragile because of rising inflation and the upwards direction of travel for interest rates, but confirmation of war and the associated alarming news headlines around the world are likely to see equity markets go through a difficult period for longer than people might have previously expected. »

But he added: “The 2.6% decline in the FTSE 100 was bad news for the millions of savers and investors who have money in UK equities, but it is by no means one of the worst days in history for the UK market. It ranked number 186 in terms of the most severe single day falls since records began. »

9.10am: UK market off its worst levels

Leading shares are still sharply down after escalation in Ukraine, but off their worst levels.

The FTSE 100 – which actually edged higher on Wednesday despite the growing signs that conflict was coming – is now down 161.36 points or 2.15% at 7336.82.

At its worst the index was as low as 7282.

Neil Wilson at Markets.com said: « There was an air of complacency yesterday as investors hoped that Russia’s incursions would be limited. That fragile hope has been shattered a Russian forces moved in overnight, apparently on all fronts. Putin delivered a TV address calling to “de-Nazify” Ukraine and demanded their forces lay down their arms. He also demanded Ukraine demilitarised…

« The West is following up with more severe sanctions…but it’s hard to think these can work now the die is cast…

« [But] when do the moves look overdone; when do you start nibbling away at some bargains? There is considerable pressure on all risk assets and the broad capitulation will inevitably lead to some babies being thrown out with the bath water…we are probably close to peak ‘fear’ markets wise…unless there is some escalation but it’s hard to see the West getting involved on that front. »

Meanwhile despite the surge in the oil price, BP PLC (LSE:BP.) is down 3.93% due to its links with Russia’s Rosneft (AIM:ROSN).

8.29am: Sanction fears hit Russian mining groups

Russian miners are inevitably on the slide on the prospect of further sanctions following the attack on Ukraine.

Evraz PLC (LSE:EVR) is the biggest faller in the leading index, down 18.7% while Polymetal International PLC (LSE:POLY) has lost 5.74%.

It is clearly a bad day to release results, for the most part. Following their updates, Rolls-Royce Holdings PLC (LSE:RR.) has fallen 13.51% as chief executive Warren East departs while Lloyds Banking Group PLC (LSE:LLOY) has lost 5.9%. Its full year profits came in at £6.9bn, but this was below expectations of £7.2bn. 

And with concerns about the impact of the conflict on travel, British Airways owner International Consolidated Airlines Group (LSE:IAG) has dropped 6.15%.

Tech investor Scottish Mortgage Investment Trust PLC (LSE:SMT) has lost 5.7% in response to the falls on the US Nasdaq market.

8.22am: Fresnillo shines amid the slump

Amid the proverbial sea of red, there are a couple of bright spots.

Precious metals miner Fresnillo PLC (LSE:FRES) is up 5.84% as gold and silver prices jump, while Shell PLC (LSE:SHEL, NYSE:SHEL, EURONEXT:SHELL) is benefiting from the surge in oil prices, up 0.64%.

BAE Systems PLC (LSE:BA.) is 0.53% better after its results, but it is of course also a defence company, which tells its own story.

8.17am: UK market drops sharply but outperforms European indices

On what should have been a day focused on a raft of company results, investors have other things on their minds as Russia launched its attack on Ukraine.

The FTSE 100 has plunged 208.81 points or 2.78% to 7289.37, on track for the biggest fall since 26 November last year when the discovery of the Omicron variant sent markets tumbling.

But it is outperforming European indices, with Germany’s Dax down 4.4% and France’s CAC 4% lower.

Oil has surged on fears the military action will disrupt supplies just as economies are recovering from the pandemic.

Brent crude has jumped 6.66% (ominous) to US$103.29 a barrel, its highest since August 2014, while West Texas Intermediate is up 6.25% to US$97.44.

Michael Hewson,chief market analyst at CMC Markets, said: « It’s probably not hyperbole to say that Europe is now at its most dangerous juncture since World War 2. »      

Meanwhile Russia’s central bank said it would intervene to prop up the rouble, after the currency slumped to an all time low of 89.60 against the dollar.

6.35am: Markets shaken by Russian military action

FTSE 100 was set to slump in early trades after Russia launched what seems to be a full-scale invasion of Ukraine.

Russian President Vladimir Putin announced the military action at 5.55am Russian time, which was followed almost immediately by shelling and missile strikes said reports from the country.

The reports said there had also been cruise missile attacks on the Ukraine capital Kyiv and further troop mobilisation in the east, on the northern border from Belarus and also in the south.

Ukrainian Foreign Minister Dmytro Kuleba said: « This is a war of aggression. Ukraine will defend itself and will win. The world can and must stop Putin. The time to act is now. »

Western countries immediately condemned the attacks. US president Joe Biden said: « President Putin has chosen a premeditated war that will bring a catastrophic loss of life and human suffering, »

Boris Johnson added Russia had chosen a path of bloodshed and destruction by launching this unprovoked attack »

On the markets, oil prices surged to over $100 a barrel, while gold moved above $1,910 an ounce with heavy falls in equity markets in the US and also across Asia.

Spreadbetters were calling the Footsie index around 150 points lower two hours before the open.

Michael James of Wedbush Securities told Reuters that currently there was « very little positive validation for buying anything. »

« If anything, President Putin is digging his heels in despite the increased sanctions, » said James.

« That’s really adding to elevated nervousness about further aggressive actions and what that will mean for commodities and inflation overall.

Ipek Ozkardeskaya, senior analyst at Swissquote added: « It’s panic in the markets. The S&P500 futures are down by almost 2%, the Nasdaq futures slipped 2.5% and the DAX and Eurostoxx futures lost near 4% this morning.

« FTSE futures are down more than 2%, but the British blue-chip index should outperform its European and American peers due to its high commodity exposure ».  

The Ukraine situation will overshadow what is otherwise a big day for results with Lloyds Bank, Centrica, Rolls-Royce, WPP and BAE Systems all reporting.

6.50am: Early Markets – Asia / Australia

Asian shares plummeted on Thursday as investors watched the escalating situation between Russia and Ukraine.

The Gold price, traditionally a safe haven in times of uncertainty, rose 1.62% and last traded at US$1,941.

Japan’s Nikkei 225 fell 1.81% and South Korea’s Kospi declined 2.61%.

The Shanghai Composite in China slipped 1.90% while Hong Kong’s Hang Seng index slumped 3.03%.

Australia’s S&P/ASX200 shed 3% in one of its worst days of the year, as investors rushed from risk assets to the safety of government bonds and gold.

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