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(Alliance News) - European stocks look set for another rough day on Tuesday following a sell-off on Wall Street overnight, as surging commodity prices and the Russia-Ukraine crisis drag down global markets.
In early UK corporate news, property developer British Land has sold 50% of an south east London housing development, investment manager M&G will pay shareholders GBP500 million, and high street baker Greggs does not expect a smooth 2022.
IG futures indicate the FTSE 100 index will open down 102.28 points, or 1.5%, at 6,857.20 on Tuesday. The index shed 27.66 points, or 0.4%, at 6,959.48 on Monday, having shown a strong recovery in afternoon trading.
"The uncertainty and volatility in stock markets are being pumped by headlines about the Russia-Ukraine conflict, with investors fearing a rise in inflation owing to sanctions imposed on Russia and the American economy may face stagflation if the situation worsens. Although crude oil prices took a step back, they are still near the 14-year high while European commodities such as wheat, gas, and nickel climbed higher," AvaTrade Chief Market Analyst Naeem Aslam said.
As Russia's invasion of its neighbour continues, commodity prices have been sent to record or multi-year highs, forcing observers to re-evaluate their outlook for the global economic recovery, with some now warning of a period of soaring inflation and low growth or recession.
Monday's session saw a sea of red across trading floors after the US said it was considering banning the import of crude from Russia, the world's number three producer, sending the price of Brent to almost USD140 for the first time since 2008.
In Asia on Monday, the Japanese Nikkei 225 index closed down 1.7%. In China, the Shanghai Composite ended 2.4% lower, while the Hang Seng index in Hong Kong was down 1.5% in late trade. The S&P/ASX 200 in Sydney closed down 0.8%.
The US said Monday any ban on Russian oil and gas imports over Moscow's invasion of Ukraine should be seen "through a different prism" than other synchronized sanctions with Western allies.
"I would look at it through a different prism than past coordinated efforts," White House Press Secretary Jen Psaki told reporters, emphasizing the "very different circumstance" between Europe, especially Germany, and the US in regard to Russian energy resources.
Certain European countries are highly dependent on Russian oil and gas, while the US has its own significant resources.
"Our capabilities and our capacities are very different both because we import such a smaller percentage of oil from Russia than the Europeans do, but also because we have a much larger capacity for producing our own oil," Psaki said.
She noted that "no decision has been made at this point" by US President Joe Biden on implementing a unilateral ban, as Democratic and Republican lawmakers work on a draft bill banning Russian oil imports to the US.
The White House has made efforts not to fracture the largely unified front with Western allies on sanctions against Russia so far, but cracks emerged Monday over the prospect of an energy ban – a move unpalatable to Germany, which is dependent on Russian gas.
SPI Asset Management analyst Stephen Innes said: "It is challenging for European equities investors, with market and price movements extreme in both quantum and speed. Outside of the fact that the market took a swift decision to mark Russian exposure to almost zero, speculators also took a fierce view on the second layer sanction effects on Europe from a prolonged war in Ukraine through the lens of the euro and European banks."
In London early Tuesday, British Land said it has formed a new joint venture with Melbourne-based pension fund AustralianSuper, by selling 50% of its share in the 'Canada Water Masterplan' in London.
British Land sold its stake in the Canada Water development for GBP290 million, and has formed a new 50-50 JV with AustralianSuper to "accelerate the delivery" of the project.
Phase 1 of the project is expected to complete in the third quarter of 2024.
M&G said it has delivered on all its demerger commitments, allowing it to unveil a new GBP500 million share buyback.
The wealth manager said the buyback will begin shortly.
M&G ended 2021 with GBP370.0 billion in assets under management & administration versus GBP367.2 billion at the same point the year prior.
Its Asset Management unit booked GBP2.0 billion in net inflows, resulting in AuMA to rise to GBP156.7 billion from GBP144.4 billion. Its Retail & Savings unit, however, recorded GBP8.3 billion in new outflows following a GBP9.6 billion asset transfer to Rothesay Life PLC as part of the firm's Heritage business run-off. Retail & Savings AuMA fell to GBP211.1 billion from GBP221.6 billion.
Excluding its Heritage sell-off, net client inflows were GBP600 million in 2021.
M&G declared total dividends of 18.3 pence in 2021, up slightly from 18.2p in 2020.
Chief Executive John Foley said: "Our focus remains on delivering long-term sustainable growth and attractive returns to shareholders through a balanced approach to capital management, while investing in priority areas alongside further internationalisation and modernisation of the business. I am confident that 2022 will be an inflection point for us."
Mexican precious metals miner Fresnillo said it was able to produce silver just below guidance in 2021, but gold production was ahead. That, together with higher prices, resulted in a rise in annual revenue.
For 2021, pretax profit improved 11% to USD611.5 million from USD551.3 million, as revenue grew to USD2.70 billion from USD2.43 billion.
Silver production was flat on the year before at 53,095 ounces, while gold production slipped 2.4% to 751,203 ounces.
Fresnillo declared total dividends for 2021 of 33.9 US cents, up 31% from 25.8 cents in 2020.
Chief Executive Octavio Alvidrez said: "Looking ahead we remain alert to potential on-going challenges that are outside our control, not least possible further regulatory reform, inflationary pressures and of course the threat of new covid variants. Lower production and recovery rates at Herradura and the continuing workforce shortages at Saucito caused by the new labour reform - as well as the impact of recent geotechnical instability in the Saucito area - are also likely to add to the pressures we may face in 2022.
"In addition, the extension to the timeline for the tie-in to the national grid of both the Juanicipio plant and the Pyrites plant mean that we now expect lower contributions than previously anticipated from these operations during 2022."
Midcap bakery chain Greggs said it does not expect "material profit progression" in 2022 as it faces cost pressures "more significant" than initial expectations.
"Despite these near-term pressures, we continue to believe that the opportunities for Greggs have never been more exciting. Our investment over recent years has left the business well-placed to move quickly as the economy recovers and we drive our ambitious plans to become a larger, multi-channel business," Chief Executive Roger Whiteside said.
For 2021, Greggs swung to a pretax profit of GBP145.6 million compared to the GBP13.7 million loss seen in 2020.
Revenue surged to GBP1.23 billion from GBP811.3 million in 2020 and were up from 2019's revenue of GBP1.17 billion, which was pre-pandemic.
Greggs declared a total dividend of 57.0p, after withholding its shareholder payout in 2020.
In first nine weeks of 2022, like-for-like sales in company-managed shops are up 3.7% compared to the same period in 2020, and up a sharp 44% against the lockdown-affected period in 2021.
Whiteside added: "In a second year dominated by disruption due to Covid, our teams once again coped magnificently with unprecedented and rapidly-changing conditions. We set out at the beginning of the year to show that we could not only cope with Covid, but emerge from this crisis both stronger and better as a business. Our results and achievements in 2021 show that we achieved both those ambitions."
Brent oil was quoted at USD127.73 a barrel on Tuesday morning in London, advancing from USD123.22 late Monday, to where the price had retreated after having neared a 14-year high of USD140.
AvaTrade's Aslam said: "Oil prices have rallied over the past few days, rising above USD130 per barrel because of the risk of global oil supplies potentially taking a hit if sanctions are imposed on Russia's oil. However, gains were capped by Germany's stance that it is not looking to curb imports of energy from Russia. Likewise, even if the US and some of its allies place a ban on Russian oil, these countries are looking to Gulf oil-rich countries to fill the gap."
Gold stood at USD2,018.20 an ounce early Tuesday, up from USD1,978.34 late Monday. The price is at its highest level since mid-2020.
In the US on Monday, the Dow Jones Industrial Average closed down 2.4% on Monday. The S&P 500 closed down 3.0%. The Nasdaq Composite closed down 3.6%.
The pound was quoted at USD1.3106 early Tuesday, down from USD1.3128 at the London equities close Monday.
In the UK, retail sales growth accelerated last month as fashion and homewares benefited from the easing of pandemic restrictions, according to new figures.
The latest British Retail Consortium-KPMG retail sales monitor revealed that total sales jumped by 6.7% in February, as the removal of Plan B restrictions improved footfall.
Nevertheless, retail experts highlighted that the high sales figures were buoyed by soaring inflation and added that Storm Eunice and waning consumer confidence did have some impact of sales for the month.
UK retail sales were 2.7% higher than in February 2021 on a like-for-like basis, the report added.
The euro was priced at USD1.0868, up from USD1.0860. Against the yen, the dollar was trading at JPY115.42, down slightly from JPY115.45.
The economic events calendar has eurozone GDP at 1000 GMT.
By Paul McGowan; paulmcgowan@alliancenews.com
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