European stocks mixed as oil prices heat up again
European stocks were mixed on Monday as oil prices near $115 (£87.11) a barrel as several EU nations push for an embargo on Russian oil and gas imports.
The FTSE 100 (^FTSE) hit its highest level in more than two weeks on Monday, up 0.6% as rising crude prices put pressure on Britain's fuel forecourts.
The higher commodity prices have helped boost energy giants on London's bluechip index. Shares in BP (BP.L) and Shell (SHEL.L) both rose around 3%.
Miners Glencore (GLEN.L) and Anglo American (AAL.L) edged 2.4% and 3.5% higher respectively as London aluminium prices leaped almost 5% after Australia banned exports of alumina and aluminium ores to Russia.
Analysts said the FTSE 100 clawed back most of its 2022 losses. Russ Mould, investment director at AJ Bell, said: "After bouncing back last week, the FTSE 100 is now within a whisker of clawing back all the losses incurred year to date.
"This resilient performance has helped to put the UK back on the map for overseas investors looking to diversify their holdings."
The FTSE declined 0.9% so far this year compared to a 10% drop in Germany’s DAX index, while Hong Kong's Hang Seng fell nearly 9% and the US S&P 500 index dropped 7%.
Read more: Oil prices near $115 a barrel as EU mulls Russian crude ban
Elsewhere in Europe, France’s CAC (^FCHI) fell 0.5% and the DAX (^GDAXI) was 0.4% lower in Germany.
"Aside from the FTSE 100 most markets have struggled to make progress today, but higher commodity prices have done the trick for the main UK index," said Chris Beauchamp, chief market analyst at online trading platform IG.
It comes as German factory costs rose at a record pace last month, raising the risk of recession even before the Ukraine crisis sent energy prices soaring. Producer prices jumped by more than a quarter in February compared to the same month in 2021, and by 1.4% compared to January.
European Central Bank president Christine Lagarde said on Monday that the EU and US monetary policies will not be in sync as the ECB adopts a slower pace to raise record-low rates. "Our monetary policies won't be running on exactly the same rhythm", she said.
"Our two economies are in a different place in the economic cycle, even before the war in Ukraine," Lagarde told a financial conference, adding that the bloc is more exposed to the war due to "geographical reasons".
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Crude prices jumped on Monday after Houthi rebels targeted various Saudi Aramco (2222.SR) oil and gas sites across the kingdom over the weekend. Some production was temporarily disrupted, fuelling concerns in an already jittery market.
The European Union is also weighing an embargo on Russian oil imports in line with its western allies as Russia increases its attacks against Ukraine.
Brent crude (BZ=F) rose 6.3% to $114.63 a barrel. US light crude (CL=F) was 6% higher to $110.98 in electronic trading on the New York Mercantile Exchange at the time of writing.
"Some uncertainty has been lifted with the path of interest rates becoming clearer on both sides of the pond,” said Richard Hunter, head of markets at Interactive Investor.
"It remains to be seen whether the proposed rate rises will be sufficient to stifle inflation in the nearer term, but the purpose and clarity of thinking from the central banks is nonetheless being well-received by investors."
Meanwhile, gold (GC=F), an asset that investors perceive as a safe haven, stabilised in Asian trading after its biggest weekly drop since June last year.
Bullion was trading at $1,925 an ounce, following a 3.4% fall after the US Federal Reserve (Fed) hiked interest rates last week for the first time since 2018.
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Across the pond, US benchmarks started the week in the red as a selloff in bonds has gathered pace as traders braced for rising inflation from surging crude prices.
Wall Street’s S&P 500 (^GSPC) declined 12.61 points, or 0.3%, to 4450.51, after the index posted its best performance since November 2020, rising 6.2% last week. The tech-heavy Nasdaq (^IXIC) fell 0.7%, while the Dow Jones (^DJI) dropped 0.8% at the time of London's close.
Shares in Boeing (BA) dropped 5.2% after a China Eastern Airlines plane, a Boeing 737, carrying 132 people crashed in southwestern China.
Investors will keep a close eye on a speech from Fed chair Jerome Powell for further clues about the economic forecast later on Monday. Last week, the Fed raised rates for the first time by a 25bp since cutting them to record lows in 2020. Consumer prices in the US soared by 7.9% in the last year, with expectations for up to six more hikes before the end of 2022.
They are also anxiously waiting to see if Russia would meet more interest repayments this week. The Kremlin must pay $615m in coupons this month, with a $2bn bond due on 4 April.
Overseas markets were muted as traders eyed Ukraine developments, oil prices and China COVID lockdown impact. The MSCI’s broadest index of Asia-Pacific shares excluding Japan was flat.
Asian stocks were mixed overnight with Japan on holiday, the Nikkei (^N225) rose 0.7% on Friday. The Hang Seng (^HSI) drifted 0.9% lower in Hong Kong and the Shanghai Composite (000001.SS) closed flat.
It comes as Chinese shares have rebounded with unprecedented force following days of sell-off as Beijing pursued regulatory crackdowns on tech firms, causing tech stocks to shed billions in value.
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Last week Chinese vice premier Liu He said that officials would take steps to shore up financial markets and boost the nation’s economy, ending a policy that has seen Chinese authorities crack down on certain industries.
China’s economy is also being hit hard by a surge in Omicron cases. "The resulting lockdowns and restrictions are raising speculation that the People’s Bank of China will have to ease monetary policy in the coming days in order to support the economy," said Michael Hewson, chief market analyst at CMC Markets.