Plexus suspends Russia licence | Polymetal directors quit
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5pm: Markets volatile
The FTSE 100 clawed its way back from a steep 190 points fall at the open to close down just 27.66 points at 6,959.48, but volatility appears to be baked into the markets just now. The CAC 40 in Paris closed down 1.3%, while the Russian gas exposed DAX 40 in Frankfurt lost 2%.
Higher energy prices stemming from the Russia-Ukraine conflict could slow the global economy and add to inflation, which is fuelling nervousness and investors have been fleeing to the safety of fixed-income assets.
BP and Shell closed up 3.8% and 8.1% respectively as they tracked spot oil prices higher. Brent oil was quoted at $123.22 a barrel at the close of London’s equity market.
Chris Beauchamp, chief market analyst at online trading group IG, said falling equity prices and rising commodity prices are hammering a “bearish theme” in the markets.
On AIM, Omega Diagnostics closed 1.08p (24.29%) higher at 5.5p as shareholders rejected its highly-dilutive placing and open offer.
9.30am: Commodities in focus
The FTSE 100 fell by nearly half the level of other markets in Europe on Monday because of its large exposure to commodities producers.
While the Dax fell 4.4% and the IBEX 35 dropped 4.3%, the FTSE 100 traded 2.6% lower. Its declines were cushioned by strength in mining and oil producers, including Anglo American which rose 4.3%, Glencore which advanced 4.2%, and Shell which traded 4.7% higher.
Russ Mould, investment director at AJ Bell, says: “After a week of businesses around the world cutting ties with Russia in protest at its invasion of Ukraine, the market is now taking a serious look at what would happen if no-one bought the country’s commodities.
“So far there have been no country-level sanctions on Russian commodity products, merely the decision of various customers not to buy. It seems we could be moving to the next stage whereby countries lay down rules to not buy oil and other commodities from Russia which in turn would reduce its funding for the war.
“Russia’s economy is heavily dependent on commodity exports and a decision by the US and potentially some of its European allies to ban the import of Russian oil would disrupt the global flow of certain natural resources and push up prices. The market increasingly seems to think this is a likely outcome, given how Brent Crude soared.”
The FTSE 100 was trading 133.28 points lower (1.91%) at 6,853.86, off its session low of 6,800.
7am: Plexus suspends Russian business
Plexus Holdings the AIM-quoted oil and gas engineering services business based in Aberdeen, said it has suspended its licence agreement on wellhead engineering equipment with its Russian licensee partner Gusar until further notice.
In September 2019 Gusar installed the first Plexus-supplied wellhead for Gazprom.
The suspension of these activities is not expected to have a material impact on Plexus’ financial trading performance in the year ending 30 June 2022 which the board anticipates will remain in line with market expectations.
However, the company believes it will incur Gusar-related negative cash flow impact of circa £650,000 in FY22 related to a combination of pending royalties and planned advance stage payments for wellhead equipment.
As the company had been performing well, it is currently anticipated that despite this situation, the year-end cash position will be broadly in line with expectations.
7am: Polymetal board resignations
Anglo-Russian precious metals company Polymetal International has announced a number of departures from its board as the company copes with the impact of the Ukraine conflict.
Chairman Ian Cockerill will be stepping down with immediate effect, while non-executive directors Ollie Oliveira, Tracey Kerr, Italia Boninelli, Victor Flores, and Andrea Abt will also leave.
Shares in the FTSE 100-listed firm have recently tumbled 80%.
Central banks are facing a growing dilemma over controlling runaway inflation while avoiding measures that add severely to the soaring cost of living.
The FTSE 100 was poised for another triple-digit slump as oil and other commodity prices surged against the backdrop of the conflict in Ukraine.
Oil hit $139 a barrel, while metals, wheat and corn were also rising.
The threat of stagflation – slow economic growth and rising prices – is now a challenge facing central banks all over the world.
Michael Hewson of CMC Markets said: “Do they tighten monetary policy and risk pushing the world into a recession even quicker, or do they allow inflation to rip even higher, which would do the same thing?”
Stock markets in Asia fell again this morning, with the Hang Seng in Hong Kong down by 3% and Japan’s Nikkei plunging 2.7%. In China, the Shanghai Composite was 2.3% lower.