LONDON MARKET OPENING: Stocks fall as EU accuses Russia of sabotage

Mysterious leaks in pipelines bringing gas to Europe from Russia provided a new source of concern for investors on Wednesday, adding to a “growing chorus of deserved criticism of British fiscal policy” and sending the stock market down by London.

The FTSE 100 index fell 140.60 points, or 2.0%, to 6,843.99 early Wednesday. The mid-cap FTSE 250 index fell 340.41 points, or 2.0%, to 16,963.70. The AIM All-Share Index fell 9.56 points, or 1.2%, to 811.79.

The Cboe UK 100 index fell 2.1% to 683.07. The Cboe 250 also fell 2.1% to 14,522.98, and the Cboe Small Companies fell 0.1% to 12,744.12.

The CAC 40 stock index in Paris fell 1.5% early Wednesday, while the DAX 40 in Frankfurt fell 1.6%.

The pound fell to $1.0672 early Wednesday from $1.0756 at the London stock close on Tuesday.

British Chancellor Kwasi Kwarteng will redouble his efforts to reassure the city about its economic plans. The Chancellor will meet investment banks on Wednesday, following days of turmoil after forex traders were spooked by policy plans announced on Friday.

Daiwa Capital Markets noted that Moody’s has also joined in the “chorus of deserved criticism of UK fiscal policy”.

Daiwa commented: “In our view, unless the government follows the advice of the IMF and announces a reversal of its plans to cut income tax on November 23, the British sovereign appears to be on the fast track. credit rating downgrades.

Investor confidence deteriorated further after the discovery of leaks in the Baltic Sea gas pipelines between Russia and Europe.

EU chief Ursula Von der Leyen said “sabotage” was behind the leaks. She threatened the “strongest possible response” to any deliberate disruption of Europe’s energy infrastructure.

The Nord Stream 1 and 2 gas pipelines have been at the center of political tension in recent months as Russia cut off gas supplies to Europe in alleged retaliation for Western sanctions over its invasion of Ukraine.

The euro fell on Wednesday morning in response to news from Nord Stream. The single currency faded to $0.9555 early Wednesday from $0.9596 at the London stock close on Tuesday.

“The problem is that damaging the infrastructure clearly pushes tensions between the West and Russia to the point of no return and destroys the hope of seeing any improvement anytime soon, both geopolitically and the energy front,” commented Swissquote analyst Ipek Ozkardeskaya. .

Western powers have also criticized annexation votes in Ukraine organized by Russia.

The authorities installed by the Kremlin in four Ukrainian regions under Russian control won the polls. Ukraine and its allies have denounced the so-called referendums as a sham, saying the West will never recognize the results of the polls.

The dollar weakened against the yen early Wednesday, falling from 144.79 JP¥ to 144.69 JP¥ by the time London shares closed on Tuesday.

And this despite news that a Plaza Accord-style monetary pact to temper the greenback’s recent rally is unlikely.

Bloomberg reported that a White House economist said a deal similar to the 1985 deal, which saw the US, UK, France, Japan and what was then known as West Germany’s name getting along to limit the strength of the dollar, shouldn’t happen now.

Stocks in the Asia-Pacific region were weaker on Wednesday. The Nikkei 225 in Tokyo closed down 1.5%, while the S&P/ASX 200 in Sydney ended down 0.5%. In China, the Shanghai Composite closed down 1.6%, while the Hang Seng in Hong Kong was down an even bigger 3.4% shortly before the close.

The consumer confidence reading in Germany also did not lift morale.

“After a brief respite the previous month, consumer confidence continued its downward spiral in September. Economic expectations and the propensity to buy saw moderate declines, while income expectations fell to a new record high,” Gfk said.

The latest German consumer confidence tracker GfK is expected to fall to minus 42.5 points for October from minus 36.8 in September.

Still ahead on Wednesday’s economic calendar is a reading of the US Goods Trade Balance at 1330 BST.

In London, boohoo shares fell 8.9% as the fast fashion retailer lowered its margin forecast. Peer Asos fell 6.6% in a negative cross-read.

boohoo posted a loss in the first half as profits were hit by weak consumer confidence and an impressive number of apparel returns. Return rates have “increased significantly year over year,” boohoo said.

In the six months to August 31, revenue fell 10% year-on-year from £975.9m to £882.4m. However, revenue was up 56% from pre-virus levels. boohoo posted a pre-tax loss of £15.2m compared to a profit of £24.6m a year earlier.

Margins have narrowed significantly. Its adjusted earnings before interest, taxes, depreciation and amortization fell from 8.7% to 4.0%.

boohoo now expects an annual Adjusted EBITDA margin of between 3% and 5%, reduced from its previous range of 4% to 7%.

Fellow AIM listing Glantus fell 62%.

The Dublin-based data platform, which provides accounts payable services, warned of “additional operational expenses” in the second half of 2022, as well as disruption from a relocation to Costa Rica.

This decision will affect the revenue schedule in the second half. Glantus also expects to incur additional costs as a result of its restructuring.

Revenue for the year will be below market expectations, he warned.

For the first half of 2022, revenue increased 54% to 6.6 million euros from 4.3 million euros a year earlier, although its pre-tax loss widened to 1.6 million euros against 1.5 million euros.

Among blue chip stocks, Barclays fell 3.6% in early trades. The bank was named among a number of companies that agreed to pay a total of $1.8 billion in fines for failing to keep electronic records such as text messages between employees on personal cellphones, US authorities said.

Barclays, Bank of America, Deutsche Bank and Goldman Sachs were among firms that accepted fines for “long-standing failures” to maintain and preserve electronic communications that must be made available to regulators under the oversight, the Securities & Exchange Commission said. in a report.

Deutsche Bank traded down 3.4% in Frankfurt. BofA and Goldman fell 1.5% and 1.1% in New York overnight.

Gold fell to $1,616.98 an ounce early Wednesday from $1,633.10 at the London stock close on Tuesday. A barrel of Brent oil fell to $84.44 from $86.44.

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