London close: Stocks firmer as Ukraine concerns ease

The FTSE 100 ended the session up 1.03% at 7,608.92, and the FTSE 250 was ahead 1.09% at 21,852.51.

Sterling was in the red, however, last trading down 0.01% on the dollar at $1.3526, and weakening 0.44% against the euro to €1.1913.

“European markets have pulled back some of their recent losses today on Russian claims that they are in the process of returning some of their troops to their bases, after the completion of military exercises,” said CMC Markets chief market analyst Michael Hewson.

“While this is an encouraging development, talk tends to be cheap and so far, there has been little evidence of that happening on the ground, which perhaps helps explain why today’s rebound has been cautious, relative to recent losses.

“Today’s rebound has nonetheless been more pronounced in Europe with the DAX and CAC 40 outperforming, however we remain below the levels we closed at on Friday, although the DAX is coming close.”

Hewson said the rebound for the FTSE 100 was “much less pronounced”, largely due to sharp falls in oil and precious metals prices, which was dragging on the likes of BP, Shell, Anglo American and Rio Tinto.

“On the plus side we’re seeing a better tone for travel and leisure which is enjoying a bit of a relief rally for the same reason, with IAG, easyJet and Wizz Air also seeing decent gains.”

It was reported earlier that Russia had returned some of the troops gathered around Ukraine to their garrisons, in a sign that it could be stepping back from an invasion.

There were no details on how many soldiers were being loaded onto trains and trucks and sent back to base, however.

Russia’s Defence Ministry spokesman Igor Konashenkov said some military exercises that had raised fears of an attack against Ukraine - including in Belarus and the Black Sea - were continuing.

“Units of the southern and western military districts, having completed their tasks, have already begun loading onto rail and road transport and will begin moving to their military garrisons today,” he said.

“A number of combat training events, including exercises, have been carried out according to plan,” Konashenkov added.

“As the combat training events are completed, the troops, as always, will march in a combined way to their permanent deployment points.”

On the economic front, official figures showed UK wages rose in the final quarter of 2021 as the Labour market withstood the end of furlough and the start of the Omicron wave.

Average weekly earnings including bonuses increased 4.3% in the three months to the end of December, the Office for National Statistics said, adding that excluding bonuses, earnings rose 3.7%.

Nominal incomes rose in a tight labour market as employment rose 0.1 percentage point to 75.5% and unemployment fell 0.2 point to 4.1% - in line with expectations.

The number or payroll employees rose 108,000 in January to a record 29.5m.

“The labour market appears to have shrugged off the end of the furlough scheme and the start of the Omicron wave, which will only encourage the MPC to continue raising interest rates,” said Paul Dales, chief UK economist at Capital Economics.

He added that falling real earnings were "something we're going to have to get used to. But the MPC will be more worried about how the tight labour market may add to inflationary pressures further ahead."

Across the pond, wholesale price inflation in the United continued rising at a brisk pace last month amid big gains both at the headline and core level.

According to the Department of Labor, in seasonally adjusted terms, so-called final demand inflation jumped at a month-on-month pace of 1.0% in January, doubling the consensus forecast.

Food and energy prices rose at a clip of 1.6% and 2.5% on the month, respectively, pushing final demand goods inflation up by 1.6%, while final demand services prices meanwhile increased by 0.7%.

"Overall, this is a disappointing report, but we remain of the view that core inflation is close to peaking and will be much lower by the end of this year as supply pressures ease and some of the huge increase in margins in some sectors is reversed by a return to more normal market conditions,” said Ian Shepherdson at Pantheon Macroeconomics.

In equity markets, AstraZeneca jumped 5.77% after it said cancer drug Lynparza, used in combination with a common hormone therapy, prolonged the life of end-stage prostate cancer treatments compared with the current treatment.

Glencore added 1.16% after saying it would pay $4bn (£3bn) to shareholders, and reported an 84% increase in underlying earnings, boosted by soaring commodity prices.

Russian steelmaker Evraz added 4.79%, having tanked more than 30% on Monday amid worries about tensions between Russia and Ukraine.

In terms of sectors, travel shares were among the top performers, having fallen sharply on Monday.

BA and Iberia owner IAG rose 4.61%, budget airlines Wizz Air and easyJet ascended 5.15% and 3.03%, and travel operator TUI was ahead 4.53%.

On the downside, BHP Group fell 1.55% despite saying it was handing back more than $7bn to shareholders in a record half-year dividend, as soaring commodities helped the world’s biggest mining company post a jump in profits.

Plus500 lost 4.07% after the online trading platform posted a decline in full-year profit and revenue.

Precious metals miner Fresnillo was 3.45% weaker as gold prices eased back, with Centamin down 3.23% and Endeavour Mining 1.97% lower.

“Soaring demand for gold in recent days has cooled after Russia confirmed the planned withdrawal of some troops; the first sign of de-escalation on the Ukrainian border amid warnings of an invasion,” said Oanda analyst Craig Erlam.

“The yellow metal was boosted by a combination of its safe-haven reputation and its inflation hedge qualities as oil and gas prices spiked.

"It peaked earlier today around $1,880 but now finds itself testing $1,850, a level that prior to the invasion warnings on Friday had been a notable level of resistance.”