News Column

MARKET COMMENT: UK Stocks Down As Russian Lorries Enter Ukraine

August 22, 2014

LONDON (Alliance News) - UK indices have fallen marginally as geopolitical tensions have moved back to the forefront on news that a convoy of Russian lorries with humanitarian aid has crossed the Ukrainian border without an escort from the International Committee of the Red Cross (ICRC).

At mid-morning Friday the FTSE 100 was down 0.1% at 6,769.6, the FTSE 250 was down 0.1% at 15,830.05 but the AIM All-Share index was up by 0.1% at 765.75.

European markets have suffered as well, with the CAC 40 down 0.7% and the DAX down 0.5%.

Interfax reported Friday morning that a group of 34 Russian lorries carrying humanitarian aid had ignored the demands of the Ukrainian government and entered Ukraine without an escort from the ICRC.

The Foreign Ministry in Moscow said earlier that it had decided to send the convoy ahead without ICRC escort. The ministry said ICRC representatives could join and take part in delivering the aid. However, ICRC officials said that they need fresh security guarantees to accompany the convoy through the conflict zone.

Before the news, the UK markets were showing caution ahead of potentially market-moving speeches by Yellen and Draghi at 1500 BST and 1930 BST, respectively, remaining flat through early trade on Friday.

Meanwhile, Barclays has downgraded their rating for the European General Retail industry to Negative from Neutral. "We downgrade our sector view to Negative from Neutral as tightening monetary policy in the UK will likely pressure the finances of UK households, forcing a reconsideration of spending habits after five years of near-zero interest rates," says Barclays analyst Christodoulos Chaviaras. He adds that historically, general retail stocks have underperformed in a increasing interest rate environment.

London Stock Exchange Group priced the fully underwritten rights issue it is launching with the aim of raising GBP938 million of net proceeds in order to part fund its USD2.70 billion acquisition of the US's Russell Investments. The company wants to combine Russell's index business with FTSE, bringing together USD5.2 trillion of assets benchmarked to Russell and an estimated USD4.0 trillion of equities benchmarked to FTSE. However, London Stock Exchange is reviewing Russell's investment management business in order to determine its fit with the group.

The issue price is a 30% discount to the theoretical ex-rights price based on the closing middle-market price of 2,005.00p per share on Thursday. The company's shares are down 0.6% mid-morning Friday.

By Neil Thakrar;

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Source: Alliance News

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