Market report

Markets dip on summit doubts | Diageo begins next buyback


5pm: Market dips on summit doubts

Boris Johnson’s post-Covid announcement did little to lift the markets today as the FTSE 100 dipped along with other indexes in Europe following Russia’s comments that talk of a summit on Ukraine were premature.

Danni Hewson, AJ Bell financial analyst, said: “Easing Covid restrictions might have boosted business activity in travel, leisure and entertainment this month, according to latest flash PMI data, but the announcement that all Covid related legal restrictions in England are going to be scrapped hasn’t helped share prices in those sectors today.

“In fact, looking at the FTSE 350 only two in those categories have seen positive growth today, with B&M and B&Q owner Kingfisher both making small gains. But then in general it’s been a depressing day for investors as they try to figure out how businesses will really “live with Covid” whilst also keeping a close eye on diplomatic efforts over the crisis in Ukraine. 

“Early optimism was given a cold bath as another day brought more conflicting reports about President Putin’s agenda. 

“US markets are closed for President’s Day but few on Wall Street will be sorry when they look out at the sea of red being displayed by their European Counterparts. Brent crude has hopped back up to over $95 a barrel amidst concern about Russian plans after it said talks of a summit were premature.

“The stage is set for another volatile week as investors consider which stocks might be impacted if Russia does ratchet up the tension by sending troops into regions held by Russian backed separatists.

Precious metals miner Polymetal and Russian steelmaker Evraz weaker after seeing an uplift in early trade on hopes the summit would take place.

AstraZeneca was the standout gainer after it said data from a late-stage trial had shown that its Enhertu drug helped patients with a type of breast cancer to live longer.

The FTSE 100 closed 29.29 points lower at 7,484.33.

9am: Summit lifts market

Traders were encouraged by the prospect of a summit between the US and Russian leaders that may prevent war in Ukraine. London blue chips ticked higher and the FTSE 100 was trading off its high at 7,542.17, up 28.55 points.

“The market remains hopeful that Russia will step back from the precipice in Ukraine with news of a potential last-gasp summit between Putin and Biden lifting sentiment on Monday,” says AJ Bell investment director Russ Mould.

“Like everyone else investors are left scratching their heads trying to decipher what the Russian leader’s end-game is and until that becomes clear then nervousness is likely to remain.

“In recent days and weeks, oil prices have bubbled higher in anticipation of the supply disruption that a Ukrainian conflict would bring, and gold has moved higher as people seek out safe havens. Both eased back at the start of the new week, but further volatility looks almost a given at this stage.

“There’s little in terms of big economic news to shift attention away from Russia-inspired tensions – though a second estimate of US GDP for the fourth quarter may capture some attention on Thursday.

“However, full-year results season in the UK hots up as the banks continue to report and other heavyweights like BAE Systems, WPP and Rio Tinto unveil their numbers.

“The banks have got off to a bit of a soggy start, with a weak reaction to Natwest’s earnings last Friday. While higher rates should boost profitability, Natwest offered a painful reminder that mounting inflation will affect the cost base, too.”

7am: Menzies board accepts proposal

Menzies board is recommending a new cash proposal at 608p per share from its Kuwaiti suitor NAS.

The final proposal, valuing the Edinburgh logistics firm at about £558m, follows earlier approaches from NAS to the board regarding possible all cash offers for Menzies at 460p, 510p and 605p.

Full story here

7am: Diageo buyback

Drinks giant Diageo has begun the third phase of its previously announced return of capital programme of up to £4.5 billion to shareholders to be completed during the next fiscal year.

Under the first two phases of the ROC programme Diageo repurchased shares with an aggregate value of £2.25 billion.

Diageo is announcing today that it will buy back shares with an aggregate value of up to £1.7 billion, of which the repurchase of shares with an aggregate value of up to £1.4 billion will be completed by 30 June 2022.

The purpose of the repurchases is to reduce the share capital of Diageo and all shares repurchased under this agreement will be cancelled.

Global markets

US President Joe Biden and Russian President Vladimir Putin have agreed in principle to a summit over Ukraine on condition that Russia does not invade its neighbour. 

Asia’s main markets rallied and European stocks were likely to follow suit. In London, the FTSE 100 was on course to open 18 points higher at 7,531.62.

The prospect of talks emerged as French President Emmanuel Macron said early Monday that he had suggested the summit to the two leaders to discuss ‘security and strategic stability in Europe.’

US Secretary of State Anthony Blinken and Russian Foreign Minister Sergei Lavrov are first scheduled to meet on Thursday to agree terms of the summit.

In the meantime, it is thought Moscow will start any invasion with a cyber-assault in Ukraine. UK security forces have also warned of cyber attacks on strategic companies and public services.

The Biden administration has promised to retaliate with sanctions against Russia, including barring US financial institutions from processing transactions for major Russian banks, Reuters reported.

The US would block the flow of currency between specific US banks and Russian banks and target individuals and companies by placing them on the Specially Designated Nationals, effectively kicking them out of the banking system.

UK Prime Minister Boris Johnson has warned that Russian firms will be prevented from raising finance in London. 

Mr Johnson will also outline plans to liberate England from the remaining Covid restrictions later today as he outlines his proposals to effectively live with the virus.

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