London close: Stocks and Gilts come under pressure
A sharp move up in crude oil futures pulled government bond yields higher along with them, weighing on stocks two days ahead of the US central bank´s next policy meeting.
On Saturday, non-OPEC and OPEC members reached a deal to cut production for the first time since 2001, lifting oil prices.
The FTSE 100 finished down 0.92% to 6,890.42 amid profit-taking in Banks and Life insurers. Meanwhile, West Texas Intermediate was up 3.05% to $53.12 a barrel and Brent crude was 2.95% higher at $56.0.
Non-OPEC countries agreed to cut production by 558,000 barrels per day, with the majority of the cuts pledged by Russia. This is in addition to OPEC’s recent agreement to slash output by 1.2m barrels a day. Comments from Saudi Arabia’s energy minister Khalid al Falih also helped to underpin oil prices, as he said the country will “cut substantially to be below” the target agreed in November with OPEC members.
BP shares rose 1.51%, while Royal Dutch Shell was 1.49% higher and Tullow Oil rallied more than 4%.
"In case of full compliance, market could be balanced as early as 1Q17, with stocks drawing thereafter," Morgan Stanley said.
IG’s Chris Beauchamp said: "The index itself is coming under pressure from banks and other financial stocks, and without the bounce in major oil firms we would be even further in the red.
“With an-almost empty corporate and economic calendar today, investors are already looking towards Wednesday’s Fed meeting as the key event of the week.”
On that note, yields on the benchmark 10-year US Treasury note hit 2.53% at one point in the session, their highest mark since September 2014.
Nonetheless, CMC Markets' Michael Hewson chipped in: “There should be no surprises around this [Fed] meeting, though the press conference will take on an even greater significance in the context of the signalling of Fed intentions in 2017, as regards further rate rises.”
Acting as a backdrop, overnight the Shanghai Stock Exchange´s Composite Index lost 2.47% to 3,152.97, alongside a retreat in the yuan and in Chinese government bonds.
Analysts referenced news that the state insurance regulator had banned Evergrande Life, a subsidiary of the nation’s second biggest developer, from investing in the country´s stocks as one of the chief triggers behind the selling.
However, some market commentary also noted how US President-elect Donald Trump had told Fox News Sunday that his support for the decades-old 'One China' policy would hinge in part on being able to reach a better deal on trade.
Investors were also digesting a report by property website Rightmove, which said that asking prices for UK properties are likely to rise by 2% in 2017, which is down from the 3.4% estimated growth this year.
In inner London, however, asking prices are expected to fall by 5% next year “as its price bubble continues to deflate”.
Rightmove said house prices fell 2.1% month-on-month in December, giving an average price of £299,159.
Glencore, Sky fall back
In corporate news, Glencore moved lower after saying that it and the Qatar Investment Authority have concluded various agreements providing for the establishment of a 50:50 consortium, to take a chunk of Russian state gas operation Rosneft.
Shares in Sky retreated after surging on Friday following a $14bn takeover bid from 21st Century Fox.
Marks & Spencer was in the black as Bank of America Merrill Lynch upgraded the stock to ‘buy’ from ‘neutral’.
DFS Furniture ticked lower after it said chairman Richard Baker will step down in spring next year after more than six years in the role.
Engineering firm WS Atkins edged higher as it agreed to sell its minority investment in the M25 motorway to a consortium of institutional investors for £66.3m.
ASOS was on the back foot as the online retailer said it will hire an additional 1,500 people at its London headquarters over the next three years.
Polymetal International lost its shine after RBC Capital Markets downgraded the stock to ‘sector perform’ from ‘outperform’ and slashed the price target to 810p from 1,460p.
Market Movers
FTSE 100 (UKX) 6,890.42 -0.92%
FTSE 250 (MCX) 17,641.15 -0.52%
techMARK (TASX) 3,251.86 -0.55%
FTSE 100 - Risers
BHP Billiton (BLT) 1,400.50p 3.36%
Antofagasta (ANTO) 774.50p 2.38%
Royal Dutch Shell 'B' (RDSB) 2,218.50p 1.58%
BP (BP.) 483.40p 1.51%
Royal Dutch Shell 'A' (RDSA) 2,118.50p 1.49%
Marks & Spencer Group (MKS) 343.30p 1.39%
Paddy Power Betfair (PPB) 8,360.00p 0.97%
Severn Trent (SVT) 2,165.00p 0.84%
Rio Tinto (RIO) 3,245.00p 0.67%
InterContinental Hotels Group (IHG) 3,369.00p 0.57%
FTSE 100 - Fallers
Capita (CPI) 454.70p -5.27%
Polymetal International (POLY) 746.50p -4.66%
Old Mutual (OML) 190.80p -3.44%
Croda International (CRDA) 3,084.00p -3.38%
Fresnillo (FRES) 1,145.00p -3.29%
Mondi (MNDI) 1,558.00p -3.29%
ITV (ITV) 185.20p -3.29%
HSBC Holdings (HSBA) 651.80p -3.27%
Barratt Developments (BDEV) 452.40p -3.25%
Glencore (GLEN) 290.25p -3.25%
FTSE 250 - Risers
Evraz (EVR) 273.00p 16.37%
Mitie Group (MTO) 224.90p 5.79%
Petrofac Ltd. (PFC) 915.00p 5.17%
Allied Minds (ALM) 414.40p 4.88%
Greencore Group (GNC) 234.00p 4.46%
Tullow Oil (TLW) 326.00p 4.39%
Hochschild Mining (HOC) 240.20p 3.98%
Vedanta Resources (VED) 963.00p 3.66%
International Personal Finance (IPF) 164.60p 2.68%
Hunting (HTG) 630.50p 2.60%
FTSE 250 - Fallers
Ladbrokes Coral Group (LCL) 119.10p -8.81%
CMC Markets (CMCX) 94.55p -5.45%
Marshalls (MSLH) 281.70p -5.12%
BGEO Group (BGEO) 3,237.00p -4.20%
Lancashire Holdings Limited (LRE) 643.00p -3.96%
Beazley (BEZ) 372.80p -3.52%
Thomas Cook Group (TCG) 85.70p -3.38%
Berkeley Group Holdings (The) (BKG) 2,774.00p -3.38%
Virgin Money Holdings (UK) (VM.) 295.00p -3.34%
Crest Nicholson Holdings (CRST) 450.30p -3.10%