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FTSE troops lower as Russia retaliates over sanctions

FTSE troops lower as Russia retaliates over sanctions

The FTSE 100 has fallen as ongoing tensions between Russia and the West continue to dampen investor sentiment.

The UK blue-chip index was down 25 points, or 0.4%, at 6,611 in a day of choppy trading. After falling in the morning's trading the FTSE 100 later pared losses, flirting with positive territory for much of the afternoon, before heading downwards as the end of the session approached.

Russia's announcement last night that it would ban the import of agricultural goods from countries that had imposed sanctions weighed on sentiment.

Coca-Cola Hellenic (CCH), which said business was being hurt by Ukraine tensions, continued to fall, trading 4.9% lower at £13.07.

Investors meanwhile turned against RSA Insurance Group (RSA), which had risen after announcing a move back into profits and progress on its turnaround plan. The stock was trading 2.9% lower at 430.8p.

ARM Holdings (ARM) rose on the back of improved analyst sentiment, trading 2.4% higher at 872p.

The Bank of England and the European Central Bank both left interest rates unchanged in their announcements this afternoon.

'It was always a racing certainty that the monetary policy committee (MPC) would continue to sit tight at their August policy meeting,' said Howard Archer, chief economist at IHS Global Insight. 'However, it is very possible that the August meeting saw a split vote emerge with at least one of the nine MPC members crossing over to the interest rate hike side.'

ECB president Mario Draghi meanwhile downplayed the worsening economic data from the eurozone and resolutely low inflation levels at his press conference accompanying the rates announcement.  

'Mario Draghi remained undisturbed,' said Peter Vanden Houte, economist at ING. 'Yes, the economic indicators have been mixed, but this is due to technical factors. The ECB's assessment of the economy therefore remains pretty much unchanged.

'The only modification was that the moderate recovery is now qualified as "uneven", to take into account the fact that Italy has actually fallen back into recession (but this is the fate of countries that haven't done sufficient structural reform, according to Draghi).'

10:17 The FTSE 100 has continued its march downwards as tensions between Russia and the West continue to weigh.

The UK blue-chip index dropped 13 points, or 0.2%, having ended yesterday’s session 52 points down as Russia built up its military presence on the Ukraine border. Russian president Vladimir Putin also last night ratcheted up tensions by banning the import of agricultural goods from countries that have imposed sanctions.

Ukraine tensions weighed on Coca-Cola Hellenic (CCH), the biggest faller on the FTSE 100, which dropped 3.6% to £13.25, as management warned volumes would be down over the year.

Pharmaceutical stock Shire (SHP) continued to drop on the fallout from increased political pressure on US president Barack Obama to eliminate tax breaks for companies that shift their headquarters overseas. Shire has agreed to a takeover by US rival AbbVie (ABBV.K), which plans to relocate the combined company to the UK, where taxes are lower. 

Insurer Old Mutual (OML) meanwhile slid 2% to 189.9p as foreign exchange headwinds weakened a jump in profits.

Rival Aviva (AV) fared better in the morning’s trading, however, rising 2.8% to 503.2p as it reported a 4% rise in operating profits over the first half of the year. RSA Insurance Group (RSA) edged 0.9% higher to 448p as the insurer bounced back into profit in the first half and said its turnaround plan was running ahead of schedule.

Investors are anticipating interest rate announcements from both the Bank of England and European Central Bank (ECB) later today. No change is expected from either, although ECB president Mario Draghi’s press conference will be keenly watched given the geopolitical tensions over the Ukraine and the flow of weak economic data from the eurozone.

Investors were dealt further bad news from Germany this morning, as the eurozone’s biggest economy reported only a marginal rebound in production in June. Production increased by just 0.3% during the month after a 1.7% drop in May. The news follows yesterday’s announcement that factory orders had slumped, together with Italy’s slip into recession and weak manufacturing figures from the UK.

‘Today’s industrial production data falls into the category of “too little, too late”,’ said Carsten Brzeski, economist at ING. ‘In fact, these data provide more, if not overwhelming evidence that the second quarter saw a stagnation of the economy if not even the first contraction since the end of 2012.’

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