London close: FTSE closes in bear-market territory

The FTSE 100 finished in a bear market on Wednesday as worries about China’s slowing economy and capital flight, a continued fall in oil prices and weak UK wage growth dragged on stocks.

London’s top-tier index closed at 5,673.58, down 3,46% on the day over 20% below its previous peak of 7103.98 on 27 April 2015. A bear market occurs when equities drop at least 20% from a recent peak.

Japan’s Nikkei index also fell into a bear market and other Asian stocks declined amid the slide in oil prices and concerns about China’s economic slowdown. Gross domestic product in China unexpectedly fell to 6.8% in the fourth quarter from 6.9% in the previous quarter, official data showed on Tuesday.

Overnight, a report from the Institute for International Finance revealed net capital flows into emerging markets went into reverse in 2015, for the first time since 1988, almost entirely because of China.

Oil prices took another tumble as concerns about oversupply in the market escalated. Brent crude fell 4.2% to $27.61 per barrel and West Texas Intermediate dropped 4.7% to $28.22 per barrel at 1632 GMT.

The International Energy Agency on Tuesday warned that oil prices will likely slide further this year as the market contends with an oversupply of production following the lifting of Iran sanctions.

“Once again it’s been lower oil prices that has prompted today’s sell-off driven lower by yesterday’s IEA announcement that the oil market “could drown in oversupply” throughout 2016,” said Michael Hewson, chief market analyst at CMC Markets.

Venezuela has requested that OPEC hold an emergency meeting to discuss ways to lift oil prices, Reuters reported on Wednesday. However, four delegates from OPEC’s member countries swiftly said a meeting was unlikely to take place.

Closer to home, data showed a pick-up in UK employment but an easing in wage growth.

UK weekly earnings rose 2% in the three months to November, easing from the 2.4% growth registered in the previous quarter, the Office for National Statistics revealed. Analysts had been expecting a 2.1% gain. “Today’s UK labour market figures showed a further slowdown in wage growth, suggesting that an interest rate hike is still some way off,” said Ruth Miller, UK economist at Capital Economics.

Nevertheless, the labour market improved, with the unemployment rate falling unexpectedly to 5.1% in three-month period from 5.2% the prior quarter.

UK employers added 267,000 jobs during the period, compared to analysts’ forecasts of 235,000 and a previous 207,000.

The claimant count rate held steady at 2.3% in December, as expected. Jobless claims last month fell 4,300, beating forecasts for a 2,800 increase, following a 2,200 drop in November.

Across the Atlantic, the US consumer price index rose 0.7% in the year to December, according to the Bureau of Labor Statistics. While it marked an improvement on the previous month's 0.5% year-on-year growth, it was below analysts' expectations of 0.8% and a long way off the Federal Reserve's 2% target.

“Although US inflation rose slightly from last month, it is still tepid and sliding inflation expectations will be a worry for the Fed,” said Dennis de Jong, managing director at UFX.com.

Meanwhile, figures from the Commerce Department showed US housing starts were down 2.5% in December from the previous month to a seasonally-adjusted annual rate of 1.15m, undershooting expectations for a rise to 1.2m. They were up 6.4% compared with the same month in 2014.

On the company front, BHP Billiton was lower after saying iron ore production is expected to be reduced by 10m tonnes due to the dam disaster at Brazil's Samarco.

Royal Dutch Shell slumped as oil prices fell and as it released a trading update saying capital investment last year was expected to be 20% lower at $29bn as a result of efficiency improvements and more selectivity on new investments.

Anglo American dropped after agreeing to sell its 100% interest in the Callide thermal coal mine in Queensland, Australia, to Batchfire Resources for an undisclosed sum.

Sports Direct was a high riser. Brenda Kelly from London Capital Group suggested short covering was the likely reason, with bargain hunters lurking.

WH Smith jumped after saying sales from its shops at airports and train stations were up 5% in the 20 weeks to 16 January although High Street sales were flat over the period.

JD Wetherspoons plunged after saying operating margins would fall in the first 12 weeks of the second quarter compared to the same period last year due to increased labour costs. Chairman Tim Martin warned that his current view was that profits for this year were "likely to be towards the lower end of analysts' expectations".

Pets at Home rose after posting slightly better-than-expected sales for the third quarter, along with a rise in total revenue growth.

Market Movers

FTSE 100 (UKX) 5,673.58 -3.46%
FTSE 250 (MCX) 15,641.01 -2.94%
techMARK (TASX) 3,003.71 -2.74%

FTSE 100 - Risers

Randgold Resources Ltd. (RRS) 4,416.00p 3.47%
Sports Direct International (SPD) 403.90p 2.30%
SABMiller (SAB) 4,123.50p -0.35%
easyJet (EZJ) 1,621.00p -0.67%
Intertek Group (ITRK) 2,685.00p -1.47%
Hargreaves Lansdown (HL.) 1,246.00p -1.50%
Burberry Group (BRBY) 1,121.00p -1.58%
ARM Holdings (ARM) 948.00p -1.66%
DCC (DCC) 4,973.00p -1.72%
Merlin Entertainments (MERL) 402.80p -1.76%

FTSE 100 - Fallers

Glencore (GLEN) 71.20p -9.85%
Anglo American (AAL) 220.40p -7.71%
BHP Billiton (BLT) 580.90p -7.37%
Royal Dutch Shell 'A' (RDSA) 1,266.00p -7.25%
Royal Dutch Shell 'B' (RDSB) 1,277.50p -6.72%
Carnival (CCL) 3,505.00p -6.11%
Aviva (AV.) 449.50p -5.33%
Old Mutual (OML) 149.40p -5.20%
Aberdeen Asset Management (ADN) 216.50p -5.17%
Prudential (PRU) 1,321.00p -5.13%

FTSE 250 - Risers

WH Smith (SMWH) 1,680.00p 5.79%
Pets at Home Group (PETS) 244.50p 4.85%
Ocado Group (OCDO) 265.30p 2.39%
AO World (AO.) 148.20p 2.07%
International Public Partnerships Ltd. (INPP) 140.70p 1.08%
Zoopla Property Group (WI) (ZPLA) 202.10p 0.95%
John Laing Infrastructure Fund Ltd (JLIF) 117.60p 0.94%
Tate & Lyle (TATE) 595.00p 0.76%
HICL Infrastructure Company Ltd (HICL) 152.50p 0.66%
Card Factory (CARD) 336.40p 0.48%

FTSE 250 - Fallers

Wetherspoon (J.D.) (JDW) 609.00p -9.71%
Amec Foster Wheeler (AMFW) 345.90p -9.33%
OneSavings Bank (OSB) 284.00p -9.27%
Morgan Advanced Materials (MGAM) 195.70p -8.72%
Keller Group (KLR) 729.00p -8.30%
Nostrum Oil & Gas (NOG) 301.40p -7.89%
Tullow Oil (TLW) 118.20p -7.66%
Genus (GNS) 1,282.00p -7.64%
Indivior (INDV) 150.60p -7.32%
Petrofac Ltd. (PFC) 661.00p -7.16%