Euro Exim Bank

Summit Talk Helps Calm Financial Markets

A moment of calm has descended on financial markets with the prospect of a summit to address the escalating Ukraine situation offering some relief to investors with the FTSE 100 edging up in early trade. The US markets are closed due to President’s Day in the US, but it’s the actions of Presidents in the US, France and Russia which seem set to determine sentiment among investors in the days to come.

Joe Biden has cautiously agreed to the talks with Vladimir Putin, brokered by France’s Emmanuel Macron, following urgent phone calls on Sunday. As the details of the summit are thrashed out,  shivers of trepidation at the prospect of war in Eastern Europe are still likely to cause fresh ripple effects on stock movements this week.

There has been a slight edging away from safe havens with gold dropping slightly but still around a 13 month high. Nervousness still hangs in the air and investors are set to stay on edge, highly sensitive to fresh political moves, or reports of sudden military action.

“The glimmer of hope that war can be averted pushed up the Russia focused mining and steel operator Evraz, which rallied by more than 3.8%.”

There are still concerns an invasion could set off another steep round of commodity price rises, adding fuel to the fire of inflation, particularly if more wide ranging sanctions are imposed such as stopping the access of Russian companies to US dollars and British pounds. This could prove a significant headache for BP given it’s a big foreign investor in Russia through the Rosneft joint operation. The diplomatic moves underway haven’t eased much pressure on the oil price, with a barrel of Brent crude rising again towards $94 a barrel. That’s helped lift Shell amid expectation that ongoing tensions will keep the overall price elevated, and BP also edged up after falling initially at the open.

Airlines flew up on a calmer route to recovery, as investors also awaited more detail about a fresh lifting of Covid restrictions in the UK. The legal requirement for isolation is expected to boost bookings, given it reduces the chance of cancelled holidays. British Airways owner International Consolidated Airlines Group and Wizz Air lifted by almost 3%,  while EasyJet rose by 1.9% and Rolls Royce, highly reliant on commercial aviation, also caught a ride upwards.

The tail was wagging in early trade for Dechra Pharmaceuticals the pet pharmaceuticals group, after it reported rising revenues helped by a surge in popularity for new furry additions to families during the pandemic.  Acquisitions and a particularly buoyant performance in the US helped lift the share price in early trade alongside upbeat guidance for the next six months after the effect of the recent wave of covid recedes. However, the group is still a contender to drop out of the FTSE 100 at the next reshuffle and some caution is likely to remain about the pace of growth in pet ownership, especially with the cost of living crisis eating into households budgets.’’