Roller coaster day for actions after Russia imposes sanctions on Ukraine | Stock markets

Markets echoed Monday in the aftermath of Russia’s invasion of Ukraine as governments ramped up sanctions and investors shifted funds from companies likely to suffer in the event of a long war.

Equity markets suffered a rollercoaster day after stocks tumbled early in the session before recovering most of the lost ground later in the day.

The FTSE 100 index of Britain’s top 100 companies fell 2% before ending the day where it started at 7,458 points. Across the continent, most exchanges closed lower, with the Paris CAC down 1.4%, although the Amsterdam AEX closed up 0.26%.

Some of the world’s biggest companies said they were considering their responses to the war as the British, US and European governments said additional sanctions on trade with Russia and restrictions on financial transactions would come into effect in A few days.

The Norwegian government has ordered its $1.3 billion oil fund, the world’s largest sovereign wealth fund, to drop its $3 billion in Russian investments. Danish container shipping company AP Møller-Mærsk said it was considering banning its ships from docking at Russian ports.

HSBC, Europe’s biggest bank, was among several leading financial firms, including France’s Societe Generale and major South Korean lenders, that said they would end ties with a host of Russian banks , as they implemented Western sanctions against Russia.

The United States, Britain, Europe and Canada announced new sanctions against Russia on Saturday, including blocking several banks’ access to the international payment system Swift after the invasion of Ukraine by Russia.

Speculation that the sanctions would negatively impact trade with Russia meant UK banks were among the biggest losers on the London Stock Exchange.

HSBC was joined by NatWest, Barclays and Lloyds to lose more than 3% of their value and was joined by insurers Prudential and Legal & General as investors shifted their funds to defense manufacturers and companies likely to benefit from the inflationary effects of the invasion.

The value of BAE Systems, which makes weapons for the UK and US military, climbed 10% to 719p, while defense technology firm FTSE 250 Chemring was up 13% to 309p.

France’s Renault, which controls Russian automaker Avtovaz, fell 6.9%. Shares of German defense firm Rheinmetall rose 43% after German Chancellor Olaf Scholz said on Sunday the country would sharply increase defense spending from 100bn euros (£84bn) to more than 2 % of its economic output.

Companies with close ties to Russia were also among the biggest fallers in London. Evraz, the Russian steel and coal company partly owned by Chelsea FC owner Roman Abramovich, fell 25%. Abramovich owns 29% of the company and received a £1.2bn dividend last year after the company reported £3.1bn profit in 2021.

Polymetal, Russia’s second-biggest gold producer, plunged 55% as investors fled to safer havens.

BP, which is the biggest foreign investor in Russia, said on Sunday it was dumping its stake in state oil company Rosneft at a cost of up to $25bn (£19bn). The British oil company lost 7% of its value on Monday morning, although analysts said it could have been more if its chief executive, Bernard Looney, had rejected overtures from business minister Kwasi Kwarteng to cut ties with Rosneft.

European Commission President Ursula von der Leyen said a number of Russian lenders and the central bank would be barred from using the system. She added: “The European Union and its partners are working to cripple Putin’s ability to fund his war machine.”

The Russian ruble plunged nearly 30% to a record low at one point, forcing the central bank to raise interest rates to 20% from 9.5%. His fall then eased to 20%.

Crude oil jumped almost 5%, while gas prices in global markets jumped almost 20% to 268p per therm, more than five times higher than the January 2021 price, but still well below to 450p per therm in December last year.

Paul Dales, chief UK economist at consultancy Capital Economics, said the UK’s position was more immune than most European countries to the ripple effects of war. Trade with Russia was minimal, and most British banks had little contact with their counterparts in Moscow.

Inflation from rising energy costs was expected to rise, but not kill economic growth, he said, leading the Bank of England to maintain its policy of raising interest rates. interest.

“But it’s worth considering the other plausible scenarios, which could prompt the Bank to delay interest rate hikes or even raise interest rates more quickly,” Dales said.

“He is obviously very uncertain about the evolution of the Russian-Ukrainian conflict, but it looks like it could be more protracted and have broader consequences than seemed likely last week.”

Goldman Sachs predicts European headline inflation will rise sharply to 5% in 2022 and said the crisis could shrink up to 0.4% of eurozone GDP this year.