London midday: Stocks fall amid escalating Ukraine tensions, Fed worries
London stocks were still lower by midday on Monday as tensions in Ukraine escalated and amid concerns the US Federal Reserve will maintain its hawkish stance after a better-than-expected jobs report last week.
The FTSE 100 was down 0.4% at 6,965.10, while the pound was 0.2% lower against the dollar at 1.1060.
Russ Mould, investment director at AJ Bell, summed the mood up well.
"A troubled backdrop has put markets in the red at the start of the new trading week. Renewed attacks on Kyiv following an explosion on the Crimea bridge at the weekend has proved a sad reminder that the war is far from over," he said.
"Also leaving investors on edge is the news that the Bank of England has doubled the amount of government bonds it is prepared to buy each day under a support initiative. While this programme is designed to provide calm to the markets following concerns about pension funds dumping gilts on the market, the fact it has doubled the previous limit of £5 billion also acts as a reminder that we’re living in unsettled times.
"Making matters worse were last Friday’s US jobs numbers, where lower-than-expected unemployment will only serve to keep the Federal Reserve on its path of interest rate hikes, something the market did not like to hear judging by the sell-off on Wall Street which then extended to Asia on Monday.
"Also contributing to Asia market weakness are tighter export controls in the US, restricting the sale of semiconductors made with US technology unless the vendors have an export licence."
Earlier, chancellor Kwasi Kwarteng bowed to pressure and brought forward publication of the government’s spending plans.
The chancellor was due to publish his medium-term fiscal plan on 23 November, nearly two months after his controversial mini-budget caused the pound to plummet and bond yields to rise.
Elsewhere, the BoE announced three additional measures to support an "orderly end" to its emergency bond-buying scheme. As well as increasing the maximum auction size, the Bank said it will launch a Temporary Expanded Collateral Repo Facility (TECRF). This will enable banks to help to ease liquidity pressures facing their client LDI (liability driven investment) funds through liquidity insurance operations, which will run beyond the end of this week.
In addition, the BoE said it "stands ready" to help the LDI pension industry through its regular Indexed Long Term Repo operations.
Looking ahead to the rest of the week, investors were eyeing the start of the US earnings season, which kicks off on Friday with the big banks.
In equity markets, Centrica and Drax were under the cosh amid reports that ministers are pushing ahead with plans to cap prices at renewable energy generators, after talks failed to persuade them to voluntarily fix contracts well below the current wholesale rates.
According to The Times, a cap to stop renewable electricity generators cashing in on soaring power prices could rake in up to £14bn a year for the Treasury.
Airlines were also weaker amid tensions in Ukraine, with BA and Iberia parent IAG, Wizz Air and easyJet all down.
Elsewhere, RS Group - formerly Electrocomponents - was knocked lower by a downgrade to ‘neutral’ at JPMorgan.
On the upside, paper and packaging group DS Smith surged to the top of the FTSE 100 after saying its performance for the full year was set to be ahead of expectations. Peers Smurfit Kappa and Mondi also racked up healthy gains.
Unite Group rallied after the student accommodation provider said full-year earnings were on track to come in at the top end of expectations as student numbers continue to grow.
Moneysupermarket jumped to the top of the FTSE 250 after an upgrade to ‘outperform’ from ‘sector perform’ by RBC Capital Markets.
FTSE 100 - Risers
Smith (DS) (SMDS) 269.30p 11.37%
Smurfit Kappa Group (CDI) (SKG) 2,599.00p 6.00%
Mondi (MNDI) 1,421.50p 5.02%
Unite Group (UTG) 826.00p 3.83%
M&G (MNG) 171.80p 3.62%
Kingfisher (KGF) 211.20p 2.72%
B&M European Value Retail S.A. (DI) (BME) 315.20p 2.67%
Next (NXT) 4,544.00p 1.95%
Legal & General Group (LGEN) 226.00p 1.89%
Tesco (TSCO) 204.50p 1.89%
FTSE 100 - Fallers
Diageo (DGE) 3,631.00p -2.75%
Burberry Group (BRBY) 1,851.50p -2.55%
Centrica (CNA) 69.16p -2.51%
Rentokil Initial (RTO) 463.30p -2.50%
RS Group (RS1) 955.00p -2.50%
Rolls-Royce Holdings (RR.) 69.07p -2.17%
AstraZeneca (AZN) 9,845.00p -1.84%
Fresnillo (FRES) 773.20p -1.83%
International Consolidated Airlines Group SA (CDI) (IAG) 99.67p -1.53%
Endeavour Mining (EDV) 1,566.00p -1.51%
FTSE 250 - Risers
Moneysupermarket.com Group (MONY) 194.50p 7.70%
Genuit Group (GEN) 290.00p 3.39%
Sirius Real Estate Ltd. (SRE) 71.30p 3.33%
Volution Group (FAN) 319.00p 3.07%
Apax Global Alpha Limited (APAX) 167.20p 2.33%
Johnson Matthey (JMAT) 1,884.00p 2.06%
Travis Perkins (TPK) 785.40p 1.87%
Marks & Spencer Group (MKS) 95.50p 1.75%
Urban Logistics Reit (SHED) 133.00p 1.53%
JPMorgan Indian Investment Trust (JII) 832.00p 1.46%
FTSE 250 - Fallers
NextEnergy Solar Fund Limited Red (NESF) 98.20p -10.40%
Greencoat UK Wind (UKW) 138.10p -8.54%
Bluefield Solar Income Fund Limited (BSIF) 126.00p -6.32%
Foresight Solar Fund Limited (FSFL) 108.00p -5.92%
IP Group (IPO) 56.30p -5.22%
The Renewables Infrastructure Group Limited (TRIG) 121.80p -4.99%
Drax Group (DRX) 532.50p -4.91%
Wizz Air Holdings (WIZZ) 1,366.50p -4.27%
Darktrace (DARK) 290.90p -3.99%
Premier Foods (PFD) 93.10p -3.82%