London close: Shares reverse early losses led by 'Big Oil'

London stocks reversed earlier losses on Wednesday as crude oil futures extended their recent bounce on supportive news out of Saudi and the States.

Just after the start of the session, a disappointing reading on China's manufacturing sector sparked broad-based selling, sending the FTSE 100 as low as 6,599.48, but by the close the top-flight index was 0.01% higher at 6,734.23.

Meanwhile, the second-tier index added 0.48% or 84.65 points to finish at 17,586.70.

In parallel, front month Brent crude oil futures were climbing 4.01% to $56.08, even as the US dollar registered sharp gains, despite the 'buzz' in markets around the potential for US central bank interest rate cuts come the beginning of 2020.

Helping oil was a Bloomberg report, citing shipping data, that Saudi had indeed curtailed its exports of black gold in December, by 420,000 barrels a day, as per its pledges to the Organization of the Petroleum Exporting Countries and other major oil producers.

The Greenback was particularly strong against Sterling, with the pound shedding 1.28% to 1.25966.

Nevertheless, traders in the City were quite cautious, with IG's Chris Beauchamp explaining that: "Bruised by the volatility of Q4 2018, investors aren't yet grabbing the chance to buy the dip with both hands, but it is at least encouraging to see a continuation of the move higher instead of the relentless selling of the past few weeks.

"Weakness in sterling will have helped power the FTSE 100 higher this afternoon, as dollar strength combines with concerns that some of the positive picture generated by this morning's manufacturing PMI was down to the stockpiling of goods in anticipation of a hard Brexit, hardly the kind of 'activity' most would consider a positive omen for UK plc."

Overnight, sentiment was undermined after China's Caixin/IHS Markit manufacturing sector Purchasing Managers' Index revealed a drop from 50.2 in November to 49.7 in December. This marked the first contraction in 19 months and fell short of expectations for a reading of 50.1.

"This is not a good indicator as we eye tariffs biting even harder in 2019 than they did last year,” said Neil Wilson, chief market analyst at Markets.com.

The weak Chinese data overshadowed news overnight that US President Trump was reaching out to Congress to help end the partial government shutdown. Trump has reportedly invited congressional leaders to a White House briefing on border security on Wednesday.

On home turf, meanwhile, UK manufacturers reported an uptick in activity for the last month of 2018 as customers stockpiled to prepare against a potential no-deal Brexit.

The IHS Markit/CIPS manufacturing purchasing managers' index rose to a six-month high of 54.2 in December from 53.6 the month before, well above the 52.5 the market expected.

"Any positive impact on the PMI is likely to be short-lived, however, as any gains in the near-term are reversed later in 2019 when safety stocks are eroded or become obsolete," said Rob Dobson, a director at IHS Markit.

Miners suffered heavy losses on the back of the Chinese data, with Glencore, Antofagasta, Anglo American and BHP among the worst performers on the FTSE 100 throughout the session.

Energy shares on the other hand received a late boost , with BP, Shell, Premier Oil and Tullow Oil all higher. To take note of, in parallel to the news out of Riyadh, in its Petroleum Supply Monthly report for October, the US Department of Energy reported a significant slowdown in domestic oil production.

That prompted analysts at Barclays Research to tell clients: "We expect a slowdown in the annual growth rate due to takeaway constraints in the Permian region and capital discipline focus among producers, especially in the wake of the sharp decline in oil prices recently."

Smith & Nephew shares slid as JPMorgan cut its recommendation on the stock to ‘neutral’ from ‘overweight’ and chopped the target price to 1,477p from 1,487p following outperformance.

On the upside, retailer Next topped the leaderboard ahead of its trading update on Thursday. Independent retail analyst Nick Bubb said Next is seen as important within the sector, both generally and particularly this year because it is one of the biggest and best managed non-food retailers, it is always honest in its analysis and guidance - "no corporate double-speak" - and chief executive Simon Wolfson is a well-respected "economic guru".

"And it is important this year because the Next share price has been under significant pressure on fears that Next lost out badly by again refusing to take part in pre-Christmas discounting," he said.

Playtech reversed earlier losses after saying it would pay an extra €28m in tax to Israel after an audit covering the 10 years to 2017.

Egyptian gold miner Centamin was also in the green as it postponed the replacement of executive chairman Josef El-Raghy, who will now remain in the role as a non-executive director until 2020 as the company has not yet identified a suitable replacement.

Energean Oil and Gas rallied after saying it had signed a $900m, 19-year gas sales deal with IPM Beer Tuvia Ltd.

Market Movers

FTSE 100 (UKX) 6,734.23 0.01%
FTSE 250 (MCX) 17,586.70 0.48%

FTSE 100 - Risers

Next (NXT) 4,177.00p 4.66%
Fresnillo (FRES) 888.00p 3.26%
Paddy Power Betfair (PPB) 6,580.00p 2.81%
Wood Group (John) (WG.) 519.60p 2.65%
Ocado Group (OCDO) 810.60p 2.61%
TUI AG Reg Shs (DI) (TUI) 1,151.50p 2.31%
BP (BP.) 506.40p 2.29%
GVC Holdings (GVC) 689.00p 2.23%
Carnival (CCL) 3,841.00p 2.07%
Severn Trent (SVT) 1,849.00p 1.85%

FTSE 100 - Fallers

Glencore (GLEN) 282.50p -3.04%
Johnson Matthey (JMAT) 2,723.00p -2.72%
Informa (INF) 614.20p -2.54%
Rolls-Royce Holdings (RR.) 809.40p -2.48%
Smith & Nephew (SN.) 1,429.00p -2.39%
InterContinental Hotels Group (IHG) 4,140.00p -2.29%
Anglo American (AAL) 1,710.40p -2.14%
Prudential (PRU) 1,373.00p -2.07%
International Consolidated Airlines Group SA (CDI) (IAG) 605.40p -2.04%
Rentokil Initial (RTO) 331.30p -1.75%

FTSE 250 - Risers

Stobart Group Ltd. (STOB) 153.80p 6.51%
Clarkson (CKN) 2,000.00p 6.05%
Hochschild Mining (HOC) 164.80p 5.61%
Centamin (DI) (CEY) 114.75p 5.47%
Acacia Mining (ACA) 192.90p 5.24%
Card Factory (CARD) 181.40p 4.61%
Rathbone Brothers (RAT) 2,444.00p 4.36%
Energean Oil & Gas (ENOG) 655.00p 4.25%
Vivo Energy (VVO) 129.86p 4.00%
EI Group (EIG) 188.60p 3.85%

FTSE 250 - Fallers

Funding Circle Holdings (FCH) 324.05p -6.07%
888 Holdings (888) 166.10p -5.09%
Aston Martin Lagonda Global Holdings (AML) 1,184.80p -3.17%
Intu Properties (INTU) 110.05p -2.95%
Auto Trader Group (AUTO) 441.40p -2.95%
Cineworld Group (CINE) 255.60p -2.89%
Victrex plc (VCT) 2,230.00p -2.53%
Galliford Try (GFRD) 607.50p -2.49%
Ferrexpo (FXPO) 190.05p -2.36%
Equiniti Group (EQN) 211.00p -2.31%