London close: Miners lead stocks lower as oil prices plunge

London stocks fell on Wednesday, led by mining shares, as oil prices tanked and as traders sifted through mixed economic data.

The FTSE 100 closed down by 39.28 points or 0.58% at 6,781.51. The pound rose 0.31% against the dollar to $1.3121.

At the same time, oil prices fell after official data showed weekly crude inventories rose more than expected, adding to worries about the global supply glut. The Energy Information Administration said crude inventories increased by 2.3m barrels last week to 525.9m barrels, more than the forecast for a 1.3m gain.

Brent crude plunged 2.5% to $47.10 per barrel and West Texas Intermediate dropped 3.1% to $44.94 per barrel at 1609 BST.

IG market analyst Joshua Mahony said: “The ghost of oversupply has not been laid to rest, indeed it seems to be returning with a vengeance. A rising US dollar and falling oil prices would potentially be a dangerous combination, threatening to unwind the gains made in equity markets over the summer. OPEC needs to do something, and quickly, but given their inability to reach a compromise, any action is still unlikely.”

Mining stocks were the biggest fallers on the FTSE as analysts at Clarksons Platou Securities said iron ore prices could drop below $50 a metric ton before the year-end, although their peers at Macquarie appeared to be more sanguine.

Anglo American, Fresnillo and Antofagasta shares nevertheless declined.

Analysts at Maquarie reaffirmed their view that iron ore prices would stabilise closer to $50 per tonne, pointing to a recent pick-up in the total shipping rate for iron ore to back-up their assessment.

BHP Billiton slumped on news it is set to strip chief executive Andrew Mackenzie of his annual bonus following the publication of a report into failures at the mining group’s Brazilian joint venture that led to last year’s collapse of a dam that killed 19 people.

Going the other way, banking stocks rallied following reports Deutsche Bank and Commerzbank had held talks on a potential merger but concluded it wasn’t a viable option.

Barclays, HSBC, Lloyds and Royal Bank of Scotland were on the FTSE 100 leader-board.

Elsewhere, Restaurant Group shares fell as Citigroup downgraded its stance on the stock to ‘sell’ from ‘neutral’ and cut the price target to 320p from 350p.

Grafton Group edged lower as the builders merchant warned of a challenging backdrop in UK merchanting.

On the data front, GfK’s headline UK consumer confidence index rose five points to -7 in August, which was slightly above consensus expectations of -8 but still well below the 12-month average of -1.

All five measures used to calculate the index increased in August, with the index of major purchases up nine points at +7 and the personal financial situation index up one point to 0.

In contrast, UK business confidence dipped in August, according to a survey. The Lloyds Business Barometer fell to 16% in August from 29% in July amid worries about Brexit affecting the economic outlook.

Nationwide revealed UK house price growth accelerated in August at 5.6% year-on-year and 0.6% month-on-month, compared to July’s 5.2% year-on-year and 0.5% month-on-month gains.

In the Eurozone, the flash estimate of inflation came in lower than expected for August. Eurostat said inflation was stable compared with July at 0.2%, which was below economists’ expectations of 0.3%, as prices of food, industrial goods and services rose less than the previous month. Core inflation – which strips out energy – was down to 0.8% from 0.9%, below estimates for it to remain unchanged.

Stephen Brown, European economist at Capital Economics, said: “The unchanged headline inflation rate in August highlights the fact that price pressures in the Eurozone remain weak and boosts the case for more monetary easing from the ECB."

The euro area unemployment rate came in at 10.1%, steady compared to June and down from 10.8% in July last year. It fell short of analysts’ expectations for a nudge down to 10%.

In the US, private employers added 177,000 jobs in August, more than the 175,000 expected by analysts, the ADP revealed. July was revised to194,000 jobs from a previous estimate of 179,000.

The report comes ahead of the US Labor Department’s non-farm payrolls report, which will be closely scrutinised after Federal Reserve chair Janet Yellen said the next interest rate hike depends on the strength of incoming data.

“The afternoon’s main piece of data, the ADP non-farm employment change figure, failed to provide investors with much guidance for either Friday’s government-released number or the likely timeline of a Fed rate hike,” said Connor Campbell, financial analyst at Spreadex.

US pending home sales rose more than expected in July, but June’s figure was revised down, according to data from the National Association of Realtors (NAR).

The NAR’s monthly index increased 1.3% to 111.3 in July from a downwardly-revised 109.9 in June, beating expectations for a 0.7% jump.

Separately, data showed economic activity in the Chicago area deteriorated more than expected in August.The Chicago Purchasing Managers’ index fell to 51.5 from 55.8 in July, led by a large setback in order backlogs and a deceleration in new orders. Economists had been expecting a smaller decline to 54.0.

Market Movers

FTSE 100 (UKX) 6,781.51 -0.58%
FTSE 250 (MCX) 17,732.77 -0.64%
techMARK (TASX) 3,442.45 -0.63%

FTSE 100 - Risers

Berkeley Group Holdings (The) (BKG) 2,672.00p 2.97%
TUI AG Reg Shs (DI) (TUI) 1,063.00p 2.31%
Tesco (TSCO) 166.35p 1.87%
Barclays (BARC) 172.25p 1.83%
Standard Life (SL.) 364.50p 1.67%
Direct Line Insurance Group (DLG) 369.00p 1.54%
Standard Chartered (STAN) 642.00p 1.47%
Babcock International Group (BAB) 1,046.00p 1.36%
HSBC Holdings (HSBA) 564.30p 1.22%
Marks & Spencer Group (MKS) 344.70p 1.09%

FTSE 100 - Fallers

Fresnillo (FRES) 1,606.00p -4.97%
BHP Billiton (BLT) 989.90p -4.86%
Anglo American (AAL) 779.80p -4.61%
Antofagasta (ANTO) 494.70p -3.28%
Randgold Resources Ltd. (RRS) 7,150.00p -2.85%
International Consolidated Airlines Group SA (CDI) (IAG) 383.00p -2.49%
Bunzl (BNZL) 2,358.00p -2.28%
Travis Perkins (TPK) 1,665.00p -2.17%
Royal Dutch Shell 'A' (RDSA) 1,860.50p -2.13%
Rio Tinto (RIO) 2,301.00p -2.11%

FTSE 250 - Risers

St. Modwen Properties (SMP) 285.50p 4.07%
Safestore Holdings (SAFE) 372.30p 2.62%
Aldermore Group (ALD) 163.50p 2.00%
Polypipe Group (PLP) 293.80p 1.90%
P2P Global Investments (P2P) 837.50p 1.89%
Wizz Air Holdings (WIZZ) 1,597.00p 1.78%
CMC Markets (CMCX) 284.40p 1.75%
DFS Furniture (DFS) 270.90p 1.73%
Homeserve (HSV) 566.00p 1.71%
Unite Group (UTG) 626.50p 1.70%

FTSE 250 - Fallers

Grafton Group Units (GFTU) 547.50p -9.95%
Allied Minds (ALM) 324.80p -7.49%
Restaurant Group (RTN) 372.50p -5.93%
Polymetal International (POLY) 1,053.00p -5.56%
Hochschild Mining (HOC) 240.60p -5.54%
Carillion (CLLN) 260.20p -4.41%
Inmarsat (ISAT) 771.00p -4.22%
Centamin (DI) (CEY) 148.50p -3.76%
Vedanta Resources (VED) 491.70p -3.68%
Tullow Oil (TLW) 217.90p -3.67%