London close: Stocks decline on oil slump ahead of FOMC rate decision

London stocks were under pressure on Friday as Brent crude hit a seven-year low and investors looked forward to the Federal Reserve’s interest rate decision next week.

The FTSE 100 ended down 2.22% to 5,953 points.

Brent crude plunged 3.4% to $38.41 per barrel and West Texas Intermediate tumbled 2.4% to $35.88 per barrel at 1621 GMT as the International Energy Agency said it sees the global market as oversupplied until late 2016. The IEA said the global oil glut was set to worsen in the months ahead as demand slows and OPEC output booms.

Oil producers BG Group and Royal Dutch Shell were among the top fallers on the FTSE 100 at the close.

On the upside, the London Metal Exchange's three-month futures contract on copper prices were sitting up 2.7%. Copper was also up 2.29% on the Comex.

Stateside, traders were wary ahead of an expected interest rate hike by the Federal Reserve on 16 December. Many analysts have priced in a 25 basis point rise in the key rate.

Elsewhere, the People’s Bank of China's signalled that it made more sense to measure the value of the yuan against a basket of currencies instead of just the US dollar, The Wall Street Journal reported.

“The fixation on the dollar spot rate has put the PBOC in a difficult position in the past couple of years,” said Mark Williams, chief China economist at Capital Economics.

“Because of the link to the strengthening dollar, the renminbi has appreciated significantly in trade-weighted terms. Yet any sustained weakness in the renminbi relative to the dollar tends to be interpreted as “devaluation” and trigger market concerns. The timing of this announcement is significant, on the cusp tightening by the Fed, which could feed further dollar strength.”

In other China news, banks issued 708.9 billion yuan ($110.10bn) of new yuan loans in November compared with 513.6 trn yuan in October, the PBoC revealed. The figure surpassed analysts’ expectations of 600bn yuan.

Closer to home, UK construction output rose less than expected in October from a month earlier, the Office for National Statistics revealed. Output increased 0.2% month-on-month in October, missing expectations for a 1% increase but better than the previous month’s 0%. In comparison to the same month a year earlier construction output gained 1% in October, well ahead of estimates for a 1.1% drop and September’s 0.3%.

Meanwhile, a survey by the Bank of England and GfK revealed consumers’ expectations for inflation of the coming year were unchanged at 2% in November. Expectations for the pace of increases in the cost of living in five years’ time, on the other hand, edged up to 2.9% from 2.8%.

The pound rose 0.33% against the US dollar but was down 0.12% against the euro at 1644 GMT.

In US data, retail sales rose 0.2% month-on-month in November to $448.1bn, according to the Department of Commerce, missing analysts’ forecasts of 0.3%.

US business inventories were flat in October, missing analysts’ expectations for a 0.1% increase, the Department of Commerce revealed in a separate report.

The University of Michigan’s preliminary estimate on the consumer confidence index rose to 91.8 in December from 91.3 in November, below estimates for a reading of 92.

Among corporate stocks, Old Mutual slid as it continued to reel from political issues in South Africa after the president sacked finance minister Nhlanhla Nene.

Anglo American dived after Goldman Sachs reiterated its ‘sell’ rating and slashed the target price from 430p to 280p.

Glencore also sank, reversing some of yesterday’s gains made after it said it had increased its planned target of reducing debt and preserving capital to the tune of $13bn (£8.6bn).

Motor insurer Admiral Group drove higher after Goldman Sachs upgraded the price target for the company from 1,500p to 1,600p.

Bellway rallied after saying it expects total completions and average selling prices to rise in the full year as it reported an "excellent" start to the current financial year.

Market Movers

FTSE 100 (UKX) 5,968.61 -1.96%
FTSE 250 (MCX) 16,898.75 -1.06%
techMARK (TASX) 3,144.43 -0.79%

FTSE 100 - Risers

Fresnillo (FRES) 677.00p 0.59%
Admiral Group (ADM) 1,616.00p 0.50%
Merlin Entertainments (MERL) 435.40p 0.46%
Meggitt (MGGT) 362.70p 0.03%
Sage Group (SGE) 591.00p -0.17%
Centrica (CNA) 210.90p -0.28%
National Grid (NG.) 907.20p -0.42%
Associated British Foods (ABF) 3,416.00p -0.58%
Compass Group (CPG) 1,118.00p -0.62%
Smiths Group (SMIN) 944.00p -0.63%

FTSE 100 - Fallers

Old Mutual (OML) 155.70p -10.62%
Anglo American (AAL) 294.55p -7.56%
BHP Billiton (BLT) 696.80p -4.96%
Royal Dutch Shell 'B' (RDSB) 1,460.00p -4.79%
BG Group (BG.) 929.60p -4.72%
Rio Tinto (RIO) 1,885.50p -4.34%
Royal Dutch Shell 'A' (RDSA) 1,457.00p -4.27%
Glencore (GLEN) 85.37p -3.97%
Tesco (TSCO) 144.95p -3.72%
Schroders (SDR) 2,700.00p -3.64%

FTSE 250 - Risers

Entertainment One Limited (ETO) 177.00p 4.49%
Bellway (BWY) 2,673.00p 4.05%
Jimmy Choo (CHOO) 110.10p 3.87%
Fidessa Group (FDSA) 1,941.00p 3.46%
Foxtons Group (FOXT) 186.00p 3.33%
Dignity (DTY) 2,365.00p 2.69%
Lancashire Holdings Limited (LRE) 622.50p 2.64%
International Public Partnerships Ltd. (INPP) 141.40p 2.17%
Daejan Holdings (DJAN) 6,195.00p 2.14%
Stagecoach Group (SGC) 304.00p 2.01%

FTSE 250 - Fallers

Premier Oil (PMO) 49.35p -13.65%
Investec (INVP) 419.00p -10.83%
Tullow Oil (TLW) 159.60p -9.88%
OneSavings Bank (OSB) 346.70p -9.69%
International Personal Finance (IPF) 293.30p -9.05%
Allied Minds (ALM) 430.00p -6.52%
Aldermore Group (ALD) 212.00p -6.48%
Vedanta Resources (VED) 292.10p -6.17%
Weir Group (WEIR) 985.50p -5.51%
Virgin Money Holdings (UK) (VM.) 378.50p -5.38%