Market report

Ukraine: FTSE 100 dives, oil price up | Menzies access call


10am: Markets rocked by Ukraine

Russian military vehicles close to the Ukraine border

The FTSE 100 posted a triple digit loss as global markets anticipated an imminent invasion of Ukraine by Russian troops. The index closed 129.43 points (1.69%) lower at 7,531.59.

The blue chip index has erased nearly all the gains year to date and other European markets are down.

Oil prices hit their highest in more than seven years on fears that an invasion could trigger US and European sanctions that would disrupt exports from the world’s top producer in an already tight market.

Traders say $100 a barrel looks increasingly likely considering possible supply disruptions ahead. An invasion of Ukraine would push oil prices sharply higher at a time when the market is already rallying on the back of an imbalance between demand and supply.

Brent crude futures was at $95.61 a barrel by 0506 GMT, up $1.17, or 1.2%, after earlier hitting a peak of $96.16, the highest since October 2014. U.S. West Texas Intermediate (WTI) crude rose $1.41, or 1.5%, to $94.51 a barrel, hovering near a session-high of $94.94, the loftiest since September 2014.

This is adding to inflationary pressures with US consumer prices already at a 40-year high of 7.5%

Danni Hewson, financial analyst at AJ Bell said: “The prospect of war is rarely good for stock markets, and so the new trading week has begun on a bad note across Europe and Asia as investors fear the alarm clock is about to sound on a physical battle between Russia and Ukraine.”

“Should Russia go to war with Ukraine, there is no telling how long the battle will last, and the damage wrought on the stock market,” said Hewson.

“Uncertainty is terrible for investors, and it will take real nerve to stay invested through war, particularly as news headlines are likely to cause panic on the markets. Yet patience has historically been rewarded as time in the markets is better than timing the markets.”

Evraz, the steelmaker with assets in the Russian Federation, took a massive hit as its shares slid 29.4% having fallen as low as 37% off.

The fall was enough to wipe around £650 million off the value of the shares held by Chelsea owner Roman Abramovich – Evraz’s biggest shareholder.

With many airlines now refusing to fly to Ukraine, British Airways owner IAG also took a hit as its shares fell 5.7%%. On the FTSE 250, Wizz Air, which serves central and eastern Europe, was off 6.34%.

Banks were under the cosh, with BarclaysNatWest and Lloyds among the worst performers on the FTSE 100.

JD Sports was also weaker after the Competition and Markets Authority fined it and Footasylum £4.7m for breaching the rules around a merger blocked by the watchdog.

7am: NAS calls for Menzies access

Menzies’ board and management team have been accused of refusing to engage with its suitor NAS whose two offers for the Edinburgh logistics business have been rejected by the board.

The Kuwait-based pursuer said in an update yesterday that the airport luggage handler had chosen not to share any information to corroborate their differing views on the company and industry, and therefore its valuation.

NAS said it “sees no reason to change its view on valuation and continues to view its improved possible cash offer of 510 pence per share as a full and fair price relative to the information Menzies has provided to the market on its current business and prospects.”  

It has again requested information access and dialogue with management and said it “looks forward to engaging with Menzies’ shareholders in parallel.”

Hassan El-Houry, NAS CEO said:  “We made a compelling offer that represents a 76% premium to the company’s share price less than two weeks ago.

“Our view is that Menzies has a strong brand legacy with a geographic presence that is complementary to NAS, but as operators ourselves, we also see a sector facing a number of challenges and a company that lacks the balance sheet to thrive.

“Unfortunately, Menzies’ management has not meaningfully engaged in a way that changes our view.”

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