London close: FTSE ends lower as oil prices plunge

London stocks reversed gains earlier in the session on Monday to end lower as oil prices reached six-year lows.

Oil companies Royal Dutch Shell, BG Group and BP slid on the FTSE 100 as Brent crude plunged 4.2% to $41.24 per barrel and West Texas Intermediate declined 5.2% to $38.06 per barrel at 1641 GMT.

The drop in oil prices came after OPEC decided late last week to keep production unchanged despite concerns of a supply glut.

“With OPEC seeming less and less like a cartel and more like an audience with the Saudis, it is likely crude prices could fall further yet,” said IG analyst Josh Mahony.

Elsewhere, a forward-looking report showed Eurozone investor sentiment improved in December, although less than analysts had forecast.

The Sentix investor confidence index for December rose from 15.1 to 15.7, slightly below analysts’ expectations for a 17 reading. It marked a first increase after two consecutive declines in the previous months, although it remained below the 16.8 average registered between June and August.

The report comes after European Central Bank President Mario Draghi on Thursday announced a cut to the deposit rate 10 basis points and extension to the quantitative easing programme until March 2017. Asset purchases were left at €60bn a month, to the surprise of analysts who had predicted an increase to around €75bn.

However, Draghi at the weekend assured the market that there was no “limit” to what the monetary authority could do if the outlook for economic growth and inflation should worsen. Draghi called the measures the ECB has put in place a “recalibration” and “not a novel monetary policy change”.

“Mr Draghi was significantly more dovish in his tone in New York than the previous day in Frankfurt, where he failed to convince financial market participants that the package decided by the Governing Council was significant enough,” according to Barclays.

In company news, Rolls-Royce jumped after a report from Sky News that senior representatives of American fund ValueAct will meet the president of Rolls-Royce's aerospace division Tony Wood. The fund has become the company’s biggest shareholder and it marks the first formal talks about its plans to revive the struggling manufacturer.

Associated British Foods also performed well after both RBC Capital and Nomura reiterated their respective ‘sector perform’ and ‘neutral’ ratings for the company.

Hammerson and Land Securities Group benefited from a note from Deutsche Bank re-evaluating the real estate sector. The investment bank said in its industry update on Monday that the sector is close to high cycle conditions.

Serco slumped after the outsourcer said it expects revenue and trading profit to fall in 2016 partly due in part to the disposal of its offshore call centre, although underlying profit for 2015 is expected to be ahead of guidance.

Man Group was given a boost after Citigroup upgraded the stock to ‘buy’ from ‘neutral’ and lifted the price target to 186p from 164p.

Shares in AO World surged after the online electrical appliance retailer said fund manager Ruane, Cunniff & Goldfarb has taken a 5% stake in the business.

Peppa Pig owner Entertainment One was lower after Canaccord Genuity cut its price target on the stock to 284p from 323p. “We think investors will be disappointed by a refinancing of existing debt facilities that has essentially led to a 9.0% cut in FY17E EPS, long before its existing facility expired in January 2018, and ahead of what management believes to be a very strong film slate in 2016,” the brokerage said.

Market Movers

FTSE 100 (UKX) 6,216.16 -0.35%
FTSE 250 (MCX) 17,354.52 -0.07%
techMARK (TASX) 3,216.22 0.37%

FTSE 100 - Risers

Rolls-Royce Holdings (RR.) 610.50p 2.69%
WPP (WPP) 1,536.00p 2.20%
Unilever (ULVR) 2,852.00p 2.11%
Associated British Foods (ABF) 3,550.00p 1.87%
easyJet (EZJ) 1,705.00p 1.79%
TUI AG Reg Shs (DI) (TUI) 1,156.00p 1.67%
Reckitt Benckiser Group (RB.) 6,300.00p 1.51%
British American Tobacco (BATS) 3,835.00p 1.43%
3i Group (III) 488.10p 1.41%
Hammerson (HMSO) 610.50p 1.41%

FTSE 100 - Fallers

Royal Dutch Shell 'B' (RDSB) 1,525.00p -4.66%
Royal Dutch Shell 'A' (RDSA) 1,514.50p -4.48%
BG Group (BG.) 983.10p -4.09%
BP (BP.) 346.65p -3.63%
Tesco (TSCO) 157.00p -3.44%
BHP Billiton (BLT) 762.50p -3.20%
Antofagasta (ANTO) 477.90p -2.81%
Glencore (GLEN) 84.89p -2.75%
Kingfisher (KGF) 344.70p -2.46%
Centrica (CNA) 206.70p -2.22%

FTSE 250 - Risers

CLS Holdings (CLI) 1,785.00p 7.14%
Allied Minds (ALM) 459.90p 3.86%
Home Retail Group (HOME) 110.40p 3.76%
Clarkson (CKN) 2,419.00p 3.46%
AO World (AO.) 168.60p 3.44%
Acacia Mining (ACA) 189.60p 2.99%
Bwin.party Digital Entertainment (BPTY) 111.20p 2.87%
Man Group (EMG) 167.40p 2.70%
Shawbrook Group (SHAW) 358.10p 2.67%
Moneysupermarket.com Group (MONY) 322.20p 2.61%

FTSE 250 - Fallers

Entertainment One Limited (ETO) 176.60p -15.01%
Lancashire Holdings Limited (LRE) 576.50p -11.92%
Premier Oil (PMO) 58.20p -10.46%
Tullow Oil (TLW) 172.90p -8.18%
Vedanta Resources (VED) 334.50p -7.01%
Ophir Energy (OPHR) 89.80p -5.47%
Petrofac Ltd. (PFC) 768.00p -5.30%
Hunting (HTG) 308.00p -4.47%
Serco Group (SRP) 109.30p -4.37%
Amec Foster Wheeler (AMFW) 400.00p -4.15%