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FTSE closes in the green as Russia nears historic foreign debt default

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·3 min read
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A national guard service officer in front of the Saint Basil's Cathedral in Moscow.The FTSE 100 tracked a rally in Asia markets. Photo: Mikhail Svetlov/Getty
A national guard service officer in front of the Saint Basil's Cathedral in Moscow.The FTSE 100 tracked a rally in Asia markets. Photo: Mikhail Svetlov/Getty

European stocks closed in mixed territory on Monday as Russia looks set to default on its foreign debts for the first time in decades — further alienating the country from the Western financial system.

The FTSE 100 (^FTSE) jumped 0.7% despite continued fears about an economic downturn, France’s CAC (^FCHI) was 0.4% lower and the DAX (^GDAXI) rose 0.5% in Frankfurt.

After narrowly swerving non-payment several times since its invasion of Ukraine in February, the Kremlin has reportedly failed to pay $100m (£81.4m) of coupons on bonds originally due on 27 May, for which a 30-day grace period ended on Sunday.

Read more: UK at risk of recession as cost of living and inflation surge

A full default will mark the first time Moscow has failed to make payments to international bondholders since the Bolshevik revolution in 1917. It comes as pressure mounts on president Vladimir Putin’s as G7 leaders seek to impose a "price cap" on Russian crude and ban gold imports in a bid to curtail its war funding.

The Kremlin's finance ministry has denied missing the deadline, claiming it made the payments in euros and dollars, adding it had fulfilled its obligations. According to Reuters, Russia has accused the west of attempting to drive it into an artificial default as it claims it is unable to send money to bondholders because of sanctions.

"A good start to the week for European equities bodes well for investors hoping for their portfolios to be repaired after a damaging start to the year," said Russ Mould, investment director at AJ Bell.

Read more: Bear market: How to protect your investment portfolio against market turmoil

Across the Atlantic, US benchmarks were mixed as investors assess whether inflation could have peaked, allowing the Federal Reserve to pull back on aggressive interest rate rises.

Wall Street’s S&P 500 (^GSPC) advanced 11.34 points, or 0.3%, to 3923.08. The tech-heavy Nasdaq (^IXIC) was trading flat, while the Dow Jones (^DJI) pushed 0.2% higher at London's close.

Asian stocks rallied again overnight, building on last week's advances and following a strong performance on Wall Street.

In Tokyo, the Nikkei (^N225) closed up 1.4%, while the Hang Seng (^HSI) edged 2.6% higher in Hong Kong and the Shanghai Composite (000001.SS) gained 0.9%.

"The positive vibe spilled over into Asian markets overnight, which were also helped along by some economic data from China, which showed that its industrial profit fell by a lesser margin in May," said Richard Hunter, head of markets at Interactive Investor.

"With production starting to resume, the decline in profit of 6.5% compared with 8.5% in April, there is some hope that China may also have turned a corner."

Watch: What is a recession and how do we spot one?