European markets drop despite cutting losses as oil prices soar

European markets closed in the red as soaring oil and gas prices fuelled concerns over potential stagflation.

However, the main markets were significantly above troughs from earlier in the day after reports the US would discuss a total ban of Russian oil.

European chiefs poured cold water on this suggestion during trading, helping to boost their markets again.

Michael Hewson, chief market analyst at CMC Markets UK, said: “Markets have recovered off the lows of the day after the Kremlin said it was prepared to stop its military action immediately if Ukraine agrees to recognise the Crimea as Russian territory, Donetsk and Lugansk as independent states, and change its constitution to guarantee neutrality.

“The best performers today have been in basic resources, and oil and gas, after seeing new record highs in European natural gas, copper, nickel and palladium prices today, and this has seen the FTSE 100 outperform today, despite hitting an intraday low of 6,787 soon after the markets opened.

“We did manage to see a sharp pullback in the afternoon session, recovering back above the 7,000 level briefly as investors get whipped from pillar to post.”

The FTSE 100 ended the day down 27.66 points, or 0.4%, at 6,959.48 points.

Shell and BP were once again among the top performers after the spike in oil prices.

Brent crude soared by 4.21% to 123.08 US dollars per barrel when the London markets closed.

German stocks were particularly hard hit in continental Europe, dropping to a 15-month low despite the afternoon improvement.

The French Cac was down 1.31% and the German Dax was 1.98% lower at the end of the session.

In the US, the markets also opened lower with the S&P500 trading down at a one-week low as concerns over surging commodity prices weighed on broader sentiment.

Meanwhile, sterling pulled back against a strengthening dollar, which struck its highest levels since May 2020.

The pound decreased by 0.12% against the dollar to 1.311, while it rose 0.01% against the euro to 1.207.

In company news, troubled subprime lender Amigo made rare gains after it said it could start lending again within a year if proposals to compensate customers for unaffordable loans are adopted this week.

The City watchdog said that it would not oppose the proposals, due to be heard in court on Tuesday, and could let Amigo start lending again nine months after they are adopted.

Shares in the firm increased by 3.75p to 6.5p at the close.

Elsewhere, Coppa Club operator Various Eateries saw shares improve after it slashed its losses for the past year as sales rebounded during a “volatile and challenging” period.

The restaurant group, which also operates under the Tavolino brand, finished 4p higher at 61.5p.

Meanwhile, Oxford Instruments dropped by 520p to 1,760p, hitting the bottom of the FTSE 250, after Spectris ended discussions over the proposed £1.8 billion takeover due to market uncertainty.

The biggest risers on the FTSE 100 were Evraz, up 17p at 77p, Shell, up 147.6p at 1,981p, BAE Systems, up 49.2p at 740.8p and BP, up 13.35p at 361.5p.

The biggest fallers on the FTSE 100 were Melrose, down 8.1p at 113.2p, Prudential, down 66.5p at 1,019p, Coca-Cola HBC, down 95p at 1,480p, and IAG, down 7.24p at 116.24p.