HSBC, NatWest, Barclays and Lloyds lose out as investors switch to defence stocks
- Russia-Ukraine crisis: live news
Last modified on Mon 28 Feb 2022 05.44 EST
Britain’s banks were among the biggest fallers on the London Stock Exchange on Monday after western governments agreed over the weekend to expand financial sanctions against Russia.
HSBC, NatWest, Barclays and Lloyds lost more than 3% of their value and were joined by the insurers Prudential and Legal & General as investors shifted their funds to defence manufacturers and firms likely to benefit from price rises after Russia’s invasion of Ukraine. The FTSE 100 was down 1.3%.
The value of BAE Systems, which makes weapons for the UK and US military, soared 14% to 745p, while the tech defence company Chemring was the biggest faller on the FTSE 250, down 11% at 304p.
On a morning of frantic trading, companies with strong connections to Russia were also among the biggest fallers in London.
Evraz, the Russian steel and coal business part-owned by the Chelsea FC owner Roman Abramovich, slumped by 25%. Abramovich owns 29% of the company and received a £1.2bn dividend last year after the company reported a £3.1bn profit in 2021.
Polymetal, the second largest gold producer in Russia, plunged 55% as investors fled for safer havens.
BP, which is the biggest foreign investor in Russia, said on Sunday it was abandoning its stake in the state oil company Rosneft at a cost of up to $25bn (£19bn). The British oil company lost 7% of its value on Monday morning, though analysts said it might have been more if its chief executive, Bernard Looney, had rejected overtures from the business minister, Kwasi Kwarteng, to cut ties with Rosneft.
Stocks on continental European exchanges also dived as investors digested the impact of western countries limiting Russian banks and institutions access to the Swift international payments system.
Deals worth trillions of dollars are transacted over the Swift system every day between banks acting as financial go-betweens.
Ursula von der Leyen said a number of Russian lenders and the central bank would be excluded from using the system. The European Commission president said: “The European Union and its partners are working to cripple Putin’s ability to finance his war machine.”
Russia’s rouble plunged nearly 30% to a record low, forcing the central bank to raise interest rates to 20%, from 9.5%.
The pan-European Stoxx 600 index fell 2.1%. The German Dax dropped 2.0%, while the Paris CAC shed 2.3%.
European banks most exposed to Russia, including Austria’s Raiffeisen Bank International, UniCredit and Société Générale, dropped between 6.3% and 15.8%, while the wider eurozone banking index fell 5.2%.
France’s Renault, which controls Russian carmaker Avtovaz, fell 6.9%. The German defence company Rheinmetall’s shares rose 43% after the German chancellor, Olaf Scholz, said on Sunday the country would sharply increase its spending on defence by €100bn (£84bn) to more than 2% of its economic output.
Crude oil jumped almost 5%, while gas prices on global markets jumped almost 20% to 268p a therm, more than five times higher than the price in January 2021, though still much lower than the 450p a therm in December last year.
Goldman Sachs forecast European headline inflation to rise sharply to 5% in 2022 and said the crisis could shave off as much as 0.4% of euro area GDP this year.
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