London close: Stocks decline as oil prices reverse gains

London stocks fell at the close on Friday after oil prices took another turn for the worse.

The UK equity market registered growth earlier in the session as concerns on China subsided and oil prices gained.

However, oil prices headed south towards the close, dragging the FTSE 100 lower. Brent crude dropped 1.9% to $33.09 per barrel and West Texas Intermediate plunged 1.15% to $32.89 per barrel.

Stateside, the US non-farm payroll s came in better than expected but wage growth remained weak.

The non-farm payrolls report showed US employers added 292,000 jobs in December, smashing estimates of 200,000.

November was revised to 252,000 from a previous estimate of 211,000. The unemployment rate held at 5% last month, as expected. However, average hourly earnings rose less than anticipated.

Average hourly earnings registered zero growth in December compared to a month ago, missing estimates for a 0.2% gain. On a year-on-year comparison, earnings grew 2.5% year-on-year in December, but was below forecasts for a 2.7% increase.

“Once again the US has produced a strong labour market report for December but once again there was one important component that was lacking, wage growth,” said Craig Erlam, senior market analyst at Oanda.

“The lack of wage growth in the US has been an issue for a long time now but it has become increasingly significant over the last 12 months due to the Fed’s decision to embark on a rate hiking cycle, despite inflation being well below the central banks’ target rate.”

The Federal Reserve last month decided to raise interest rates for the first time in nearly a decade.

Paul Ashworth, chief US economist at Capital Economics, said he believed December’s non-farm payrolls “obviously support a March rate hike” but developments in inflation will determine the pace of future increases.

“With oil prices close to $30 a barrel now, this latest labour market improvement doesn’t necessarily guarantee a March rate hike, although we do think that is the most likely outcome.”

Closer to home, lower oil prices had a positive impact on UK trade figures. Britain’s trade deficit narrowed to £3.17bn in November from a downward revised £3.50bn in October, according to the Office for National Statistics, as cheaper oil prices reduced the cost of imports.

Meanwhile, China’s stock market ended higher after Thursday’s losses as regulators ended the “circuit breaker rule” and the People’s Bank of China set the daily yuan rate higher.

Trading in China was suspended after 30 minutes on Thursday as equites on the CSI 300 index fell 7%, triggering the “circuit breaker rule”.

The new circuit breakers, which kicked in on Monday, have been criticised by analysts for exaggerating declines as investors rush to exit positions before getting locked in by the halts.

In Europe, a report showed German industrial production fell 0.3% in November compared to a month ago, missing expectations for a 0.5% increase.

Germany’s trade balance surplus fell to €20.6bn in November from €22.3bn in October, although it was above the estimated €20.2bn. Exports rose 0.4% in November, compared to forecasts of 0.5% and the previous month’s 1.3% decline. Imports gained 1.6% in November following a 3.2% drop a month earlier, beating projections for a 1% increase.

On the company front, Royal Dutch Shell, BP and Tullow Oil continued to slide on concerns about the sector as oil prices tumbled.

Mining stocks were also under the cosh, including Anglo American, BHP Billiton and Rio Tinto, as gold and silver prices declined.

Sports Direct International tumbled after saying it is no longer confident of meeting its adjusted underlying core earnings target for the full year due to deteriorating trading conditions on the high street and unseasonal weather over Christmas.

Tesco jumped after Barclays upgraded the stock to ‘overweight’ from ‘equalweight’, saying the recent share price underperformance has left the supermarket’s valuation at attractive levels.

GlaxoSmithKline rallied after influential investor and founder of Woodford Investment Management Neil Woodford said he believed the company should be split up.

BAE Systems increased after RBC Capital Markets upgraded it from ‘outperform’ to ‘top pick’, and raising the target price from 570p to 630p.

EasyJet also took off after Moody's assigned an inaugural Baa1 long-term issuer rating to the budget airline with a ‘stable’ outlook.

Spire Healthcare gained after the company reiterated its 2015 guidance for revenue growth.

Market Movers

FTSE 100 (UKX) 5,928.21 -0.43%
FTSE 250 (MCX) 16,763.24 -0.17%
techMARK (TASX) 3,175.93 0.74%

FTSE 100 - Risers

Tesco (TSCO) 147.05p 5.64%
BAE Systems (BA.) 521.00p 3.07%
TUI AG Reg Shs (DI) (TUI) 1,252.00p 2.79%
Rolls-Royce Holdings (RR.) 560.50p 2.66%
easyJet (EZJ) 1,710.00p 2.46%
GlaxoSmithKline (GSK) 1,377.50p 2.45%
Vodafone Group (VOD) 223.05p 2.22%
Persimmon (PSN) 1,995.00p 1.68%
Burberry Group (BRBY) 1,095.00p 1.58%
Standard Life (SL.) 364.10p 1.56%

FTSE 100 - Fallers

Sports Direct International (SPD) 433.90p -15.25%
Royal Dutch Shell 'B' (RDSB) 1,379.00p -5.68%
Royal Dutch Shell 'A' (RDSA) 1,376.50p -5.36%
Anglo American (AAL) 230.20p -4.34%
BHP Billiton (BLT) 652.10p -3.21%
Ashtead Group (AHT) 1,017.00p -2.87%
Antofagasta (ANTO) 399.10p -2.80%
Hargreaves Lansdown (HL.) 1,381.00p -2.47%
Associated British Foods (ABF) 3,037.00p -2.41%
Rio Tinto (RIO) 1,742.50p -2.35%

FTSE 250 - Risers

Vectura Group (VEC) 187.80p 5.45%
Elementis (ELM) 217.00p 4.68%
Rank Group (RNK) 296.90p 4.07%
Marston's (MARS) 164.90p 3.84%
Indivior (INDV) 182.90p 3.27%
Just Eat (JE.) 472.00p 3.17%
BBA Aviation (BBA) 179.40p 3.16%
Sophos Group (SOPH) 253.30p 3.09%
Halfords Group (HFD) 324.70p 3.08%
Auto Trader Group (AUTO) 438.70p 2.86%

FTSE 250 - Fallers

Tullow Oil (TLW) 138.90p -7.40%
Evraz (EVR) 63.00p -6.80%
Jimmy Choo (CHOO) 118.00p -6.57%
Petrofac Ltd. (PFC) 699.50p -5.66%
Wood Group (John) (WG.) 550.00p -5.25%
Vedanta Resources (VED) 227.10p -5.22%
Aggreko (AGK) 846.00p -4.19%
Debenhams (DEB) 64.90p -4.14%
Enterprise Inns (ETI) 103.50p -4.08%
Genus (GNS) 1,446.00p -4.05%