London open: Stocks drop ahead of Russia-Ukraine talks, ECB announcement

London stocks fell in early trade on Thursday following strong gains in the previous session, as investors eyed high-level talks between Russia and Ukraine and the latest policy announcement from the European Central Bank.

At 0845 GMT, the FTSE 100 was down 0.8% at 7,130.22.

Foreign ministers from Russia and Ukraine are due to hold talks in Turkey later in the day in what will be the first high-level meeting between the two sides.

Danske Bank said in a note that it does not expect the Russia-Ukraine conflict to spread to other countries and sees commodity prices broadly moderating over the next six months.

"We expect the Ukrainian and Russian leaders to eventually agree on a truce. We also believe that the Ukrainian government will be forced to painful concessions in the absence of direct military intervention by the West/NATO," it said.

"In our main scenario, we believe some level of conflict is likely to remain in Ukraine despite a potential truce, and uncertainty will prevail, but the war will not spread to other countries in Europe. In any case, we do not expect sanctions against Russia to be removed any time soon. On the contrary, there is still room for the West to step up sanctions.

"Commodity prices have spiked after the war started. In our view, prices are out of sync with fundamentals and we expect a gradual normalisation as the market learns to cope with the new situation."

Away from geopolitics, investors were eyeing the latest policy announcement from the ECB, due at 1245 GMT and US inflation data at 1330 GMT. Danske said: "We expect the ECB to continue its path towards entering a 'neutral' monetary policy calibration and formally set an end date for the APP programme (in September this year), due to the high inflation pressure, but fall short of giving a firm indication of an upcoming rate hike."

In equity markets, Rio Tinto, Persimmon, HSBC and Micro Focus were all weaker as they traded without entitlement to the dividend.

On the upside, Anglo-Russian precious metals miner Polymetal was the top gainer on the FTSE 100

Engineering group Spirax-Sarco was also a high riser after predicted strong growth in 2022 as it reported a sharp rise in annual profit and increased its dividend.

Hill & Smith, Spirent Communications, Volution and Capita were all up after results.

In broker note action, Capital & Counties was higher after an upgrade to ‘overweight’ at Barclays.

Market Movers

FTSE 100 (UKX) 7,130.22 -0.84%
FTSE 250 (MCX) 20,069.19 0.00%
techMARK (TASX) 4,159.72 -0.30%

FTSE 100 - Risers

Polymetal International (POLY) 169.30p 8.73%
Antofagasta (ANTO) 1,533.50p 2.37%
Spirax-Sarco Engineering (SPX) 11,555.00p 2.03%
Glencore (GLEN) 477.95p 1.67%
Evraz (EVR) 94.00p 1.58%
Hikma Pharmaceuticals (HIK) 1,988.00p 1.53%
Taylor Wimpey (TW.) 135.35p 1.23%
Airtel Africa (AAF) 139.10p 1.09%
Barratt Developments (BDEV) 554.40p 1.06%
Compass Group (CPG) 1,642.00p 0.74%

FTSE 100 - Fallers

Rio Tinto (RIO) 5,446.00p -6.38%
Persimmon (PSN) 2,201.00p -5.74%
HSBC Holdings (HSBA) 470.25p -3.83%
CRH (CDI) (CRH) 3,090.00p -3.77%
Burberry Group (BRBY) 1,608.00p -2.63%
Coca-Cola HBC AG (CDI) (CCH) 1,565.00p -2.19%
Rolls-Royce Holdings (RR.) 92.36p -2.14%
Abrdn (ABDN) 187.30p -1.81%
Legal & General Group (LGEN) 255.20p -1.81%
Intermediate Capital Group (ICP) 1,520.50p -1.78%

FTSE 250 - Risers

Hill & Smith Holdings (HILS) 1,416.00p 9.43%
Capita (CPI) 23.35p 6.77%
Spirent Communications (SPT) 239.20p 6.12%
Molten Ventures (GROW) 714.00p 4.23%
Volution Group (FAN) 481.00p 3.78%
National Express Group (NEX) 250.80p 3.72%
Moonpig Group (MOON) 221.80p 3.36%
Capital & Counties Properties (CAPC) 160.50p 3.35%
Ferrexpo (FXPO) 145.70p 3.33%
Network International Holdings (NETW) 201.80p 3.28%

FTSE 250 - Fallers

Micro Focus International (MCRO) 352.90p -4.47%
Darktrace (DARK) 473.20p -3.39%
Oxford Biomedica (OXB) 664.00p -2.64%
Quilter (QLT) 129.00p -2.49%
888 Holdings (888) 184.70p -2.38%
SDCL Energy Efficiency Income Trust (SEIT) 114.50p -2.14%
Wizz Air Holdings (WIZZ) 2,851.00p -1.99%
Oxford Instruments (OXIG) 1,876.00p -1.88%
Brewin Dolphin Holdings (BRW) 280.00p -1.75%
Law Debenture Corp. (LWDB) 757.00p -1.69%