The FTSE 100 was trading 0.1% lower at 6,550 in early trading.

Nato has warned that Russian army units have built up their presence near Ukraine’s border, and is reportedly concerned about the threat this poses to Moldova’s Trans-Dniester region. Russia has insisted it is operating in compliance with the agreements made at the international level.

Speaking to the BBC, Ukrainian Foreign Minister Andriy Deshchytsia said the risk of war with Russia was increasing. He explained that Russian President Vladimir Putin is opposed to talking to both Ukrainian and Western powers, which poses “quite a danger for the decision-making process”.

“We could only expect that he might invade,” he added.

Output in China’s manufacturing sector continued to contract in March, according to published by HSBC/Markit on Monday. The flash China manufacturing purchasing managers’ index hit an eight-month low at 48.1. Analysts had expected the reading to rise from February’s 48.5 to settle at 48.7. Readings below 50 indicate a contraction in the sector.

“Weakness is broadly-based with domestic demand softening further,” HSBC Chief Economist Honbin Qu said in the report. “We expect Beijing to launch a series of policy measures to stabilise growth. Likely options include lowering entry barriers for private investment, targeted spending on subways, air-cleaning and public housing, and guiding lending rates lower,” he added.

Phoenix Group jumps on Standard Life talks

Financial services group Phoenix Group Holdings advanced after insurance giant Standard Life confirmed weekend media speculation that it is in talks to buy its Ignis Asset Management division. Reports suggest that Standard Life is considering offering £400m for Ignis.

Utility groups Centrica and SSE were lower this morning ahead of the results of an Ofgem investigation which could see the regulator recommend for a competition inquiry into the energy industry.

British American Tobacco was lower after Credit Suisse downgraded its rating on the stock from to ‘neutral’, while Lloyds was upgraded to ‘buy’ by Investec.

Engineering and construction group Kentz Corporation was a high riser after boosting its full-year dividend by 21% after double-digit growth in profits in 2013. The company also said that 2014 trading is “expected to exceed management’s previous expectations”.

Egypt-focused gold miner Centamin rose after delivering record operating profits in 2013 as an increase in production and falling costs managed to offset a steep drop in commodity prices.

Technical products and services provider Diploma fell after warning that full-year earnings will be affected by the stronger pound.

FTSE 100 – Risers
Lloyds Banking Group (LLOY) 78.55p +1.53%
Tesco (TSCO) 294.85p +1.36%
Sainsbury (J) (SBRY) 312.90p +1.10%
Royal Mail (RMG) 587.50p +1.03%
Sage Group (SGE) 428.10p +0.87%
Legal & General Group (LGEN) 207.40p +0.68%
Morrison (Wm) Supermarkets (MRW) 212.60p +0.66%
Standard Life (SL.) 368.30p +0.63%
Glencore Xstrata (GLEN) 305.50p +0.63%
Experian (EXPN) 1,069.00p +0.56%

FTSE 100 – Fallers
William Hill (WMH) 332.60p -1.92%
Mondi (MNDI) 1,018.00p -1.64%
ARM Holdings (ARM) 978.50p -1.61%
Smiths Group (SMIN) 1,304.00p -1.44%
Wolseley (WOS) 3,347.00p -1.33%
Barratt Developments (BDEV) 398.60p -1.19%
SSE (SSE) 1,493.00p -1.13%
Centrica (CNA) 334.30p -1.07%
Coca-Cola HBC AG (CDI) (CCH) 1,461.00p -1.02%
Severn Trent (SVT) 1,869.00p -1.01%

Source: ShareCast