Baby Ace: FTSE LIVE: Footsie off early lows but still cautious as Ukraine moves, Fed policy meeting eyed

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This Is Money Reporters

10.00: London shares stayed weak but eased off opening lows as the morning session progressed as traders kept a wary on the situation in Ukraine and also positioned themselves for the outcome tomorrow of Janet Yellen’s first Federal Reserve FOMC monetary policy meeting.

After two hour’s of trading, the FTSE 100 was 17.2 points lower at 6,551.4, recovering from an early session low of 6,534.9.

Markus Huber, senior sales-trader/senior analyst at Peregrine Black said: ‘European equities are trading lower this morning giving back some of the impressive gains seen yesterday as some consider yesterday’s short covering rally somewhat overdone in light of the Crimean crisis far from being resolved.

Fed awaited: Janet Yellen will chair her first FOMC meeting as boss of the US central bank today, with a monetary policy decision due after it finishes tomorrow

‘Still there is now a lot more certainty what the future of the Crimean peninsula and the retaliatory sanctions imposed by the EU and the US on Russian and Ukrainian officials are concerned, leading to traders having an overall less negative view on stocks.

‘Especially towards the end of last week many traders entered into short positions on major European and US indices not only because they viewed the crisis as close to possibly escalating but also as a hedge on their individual long stock positions.

‘Some of these hedges have been unwound yesterday as some uncertainty has been removed for now and the referendum hasn’t resulted in any further bloodshed leading consequently to a short covering rally.

‘While markets remain vulnerable to any renewed intensifying of the Crimean crisis at least temporarily markets are expected to somewhat turn away from politics with the FOMC decision on Wednesday starting to take centre stage,’ Huber added.

New Fed boss Janet Yellen is expected to continue her predecessor’s policy of a gradual tapering of the US central bank’s equity supportive bond buying programme when the two-day meeting finishes tomorrow.

In London, supermarkets were spared a further slump in shares today, despite a warning from Sainsbury that the sector is growing at its slowest pace in a decade.

The supermarket chain broke a nine-year run of sales growth by revealing that like-for-like sales excluding fuel slumped 3.1 per cent in the 10 weeks to March 15.

The trading update added to the gloom in the sector after last week’s big full-year loss from William Morrison and accompanying profits warning for 2014.

But having suffered a slide in the wake of the Morrison’s warning, supermarket stocks held firm today with Sainsbury’s up 5.9p at 317.35p, Tesco 4.4p higher at 304.1p., and Morrisons adding 1.0p at 208.4p.

Elsewhere in the retail sector, shares in fashion chain ASOS dived 16 per cent lower after its latest sales figures missed City expectations and it warned that margins were likely to be impacted this year by investment costs, including in China.

The stock, which has risen from 255p at the start of 2008 to more than 7,000p last month, was down 1,026p to 5,300p today.

The warning also had an impact on smaller rival Boohoo.com, whose shares slid 7.75p to 58.75p, just days after joining the stock market in a move that delivered a big windfall for its founding family.

ASOS’s disappointing results also weighed on blue chip high street retailer Next which has a strong online presence.

Next shares topped the FTSE 100 fallers list, down 105.0p to 6,610.0p, albeit with the stock having soared 2 per cent higher yesterday ahead of this Thursday’s annual results.

Elsewhere among the blue chip fallers, market heavyweight Vodafone was a drag, down 2.2p at 223.8p following yesterday’s confirmation of the £6billion takeover of Spain’s Ono by the mobile phones giant, with Oriel Securities downgrading its rating for the UK firm to reduce from hold.

‘Economies are recovering and regulatory headwinds will dissipate. But price based competition is spilling into 4G, and incumbents will fight much more on bundled, not just mobile services. Also ATT recently gave more reasons not to expect a bid for VOD. All in therefore VOD’s 5.0 per cent divi yield is not enough,’ Oriel analysts said in a note.

But Chilean copper miner Antofagasta lent the blue chips some strength, adding 26.5p at 874.0p as a surprisingly strong final dividend payment balanced broadly in-line full year results, showing a desire to return cash to shareholders.

And defence firm BAE Systems was also on the up, adding 4.1p at 400.6p as RBC Capital raised its rating for the stock to outperform from sector perform.

‘In our view the US defense budget outlook is stabilizing, and this is BAE’s largest end market (33 per cent of 2013 sales). With a steady UK budget outlook, and potential upside from export sales, we see BAE’s revenues troughing in the medium term,’ RBC analysts said in a note.

08.30: The FTSE 100 has opened 25.6 points down at 6,542.7, as wary traders await fresh developments in the Crimea crisis.

The peaceful passing of a referendum in Crimea, which the West denounced as illegal, helped to buoy global equity markets yesterday.

Gains were extended after the US and Europe revealed sanctions that traders described as ‘modest’, with the measures not seen as escalating the crisis in the short term.

Ukraine crisis: Russia president Vladimir Putin, pictured right, is due to make a key speech about the future of the Crimea peninsula later today

Russian President Vladimir Putin has

decreed Crimea a sovereign state after the referendum, which is expected

to pave the way to his official annexation of the peninsula.

The FTSE 100 closed up 40.5 points at 6568.4 yesterday, bouncing off Friday’s one-month low .

It fell 2.8 per cent over the course of last week, largely due to tensions over Crimea and fears of an economic slowdown in China.

‘Whether the relief seen in a number of risk assets was genuine belief that the Russian, Ukraine and G7 tensions were appeased by the modest actions of the EU and US is yet to be seen, but this good will could prove to be premature,’ said Chris Weston, chief market strategist at IG.

‘It’s too early in my mind to be fully unwinding political hedges.

‘We should hear more from Vladimir Putin today and this could be key for sentiment in today’s session; however what’s important is that he still doesn’t recognise Ukraine as having a legitimate government, while he also feels he has the right to protect the Russian ethnic population in the east of Ukraine.’

Michael Hewson of CMC Markets said: ‘The prospect for unpleasant surprises still remains high with the potential for further flash points on Ukraine’s eastern border.’

Regarding sanctions, he added: ‘For now it seems that EU leaders have fired an early salvo towards Russia but have kept back the rest of their options in the event that President Putin decides to take a decision to annex the Crimea when he talks to the Russian Parliament today.

‘Putin already raised the stakes again late last night when he recognised Crimea as an independent nation, despite the sanctions, and it will be instructive to see how EU leaders react in the event he decides to push on and approve an annexation.

‘It seems that President Putin is of the opinion that EU leaders may lack the stomach to implement further measures given yesterday’s rather timid first salvo. This could turn out to be a mistake despite current splits amongst some EU governments.

‘Given the lack of options open to EU leaders it is more likely that policymakers decided to temper their response, after all you don’t load a gun and then empty the chamber all at once. This then allows for further measures to be implemented in the event of non compliance with the ultimate sanctions being applied to Putin himself.’

Stocks to watch today include:

J SAINSBURY: The supermarket chain said sales at stores open over a year fell 3.1 per cent, excluding fuel, in the 10 weeks to March 15, compared with analysts’ forecasts in a range of down 2-3 per cent. The group said it was confident it would outperform peers in the year ahead.

BARCLAYS: The bank will try to take the sting out of a heated debate over bankers’ bonuses by pointing to a drop in the value of shares given to its top executives even as the lender’s chief executive Antony Jenkins is awarded a £4million payout, the Financial Times reported.

IG GROUP: The provider of financial spread betting and contracts for difference posted a 9 per cent rise in third-quarter revenue, citing improved conditions in financial markets.

CAIRN ENERGY: The oil and gas explorer posted a $556million loss after tax in 2013 after high costs for unsuccessful drilling in Morocco and the North Sea.

ROYAL MAIL: The pleasure of delivering many Londoners their council tax bills, parking fines and other local bureaucratic paperwork is to revert to the Royal Mail, The Times reported.

MONEYSUPERMARKET.COM: Founder Simon Nixon plans to sell approximately 55million existing ordinary 0.02 pence shares in the price-comparison website, representing approximately 10 per cent of its issued share capital, the firm said after the market close yesterday.