London close: Stocks erase gains as Brent drops 5%, Afren plummets

UK stocks were levelled by a 5%-plus drop in the price of oil on Monday, overshadowing increased hopes of further stimulus from the European Central Bank (ECB).

The FTSE 100 finished flat at 6,501 by the close, erasing gains after hitting an intraday high of 6,542.43 early on.

"The Eurozone euphoria that is driven by quantitative easing talk is not felt in London as natural resource stocks weigh on the British market," said analyst David Madden from IG.

He said that turmoil in the commodity markets was "tak[ing] the shine off the ECB easing chatter", with oil and mining stocks falling sharply.

Brent crude was down 5.1% at $47.57 a barrel by Monday afternoon, a level not seen in over five and a half years, as analysts at Goldman Sachs and Societe Generale slashed their price forecasts. Saudi billionaire Prince Alwaleed bin Talal was making headlines after claiming that $100-a-barrel oil is a thing of the past.

Heightened fears about deflation - mainly attributable to the collapse in oil prices - have added to speculation that the ECB will introduce full-blown quantitative easing when it meets next week.

Nevertheless, investors were showing caution ahead of the unofficial start of US fourth-quarter earnings season with aluminium giant Alcoa releasing its results after the closing bell on Wall Street. JPMorgan Chase & Co, Goldman Sachs and Well Fargo will also report this week.

Afren leads oil and gas stocks lower

Oil and gas group Afren was a big mover on the stock market on Monday, dropping 21% after analysis of the Barda Rash field in the Kurdistan region of Iraq showed a “material reduction” in reserve estimates. The company said it is now looking at its “strategic options” for its 60% interest in the project.

Others in the oil and gas sector were also under pressure as crude prices continued to fall, such as BG Group, Ophir Energy, Premier Oil and Soco International. In contrast, the lower oil price was helping stocks in the travel sector higher, including Carnival and TUI.

Mining stocks were also weaker, including Glencore, BHP Billiton, Anglo American and Rio Tinto.

Biopharmaceutical group Shire was lower after agreeing to acquire US rival NPS Pharmaceuticals for $5.2bn in cash, in a deal which it said will boost its revenue and earnings growth profile, while creating new business opportunities worldwide.

Shares in energy providers SSE and Centrica were hit by comments from Ed Miliband who said he would try to introduce a law enabling energy regulators to force companies to cut prices when wholesale costs decline.

Electrical appliances seller AO World jumped after saying it was confident of hitting full-year expectations following 26% revenue growth in the third quarter and strong demand seen on Black Friday.

Engineer GKN was given a boost by Credit Suisse which lifted its target price on the stock from 380p to 410p and reiterated an ‘outperform’ rating, saying that automotive and train operations could "deliver upside surprise to earnings consensus estimates".

Market Movers
techMARK 2,990.35 +0.26%
FTSE 100 6,501.42 0.00%
FTSE 250 15,943.69 -0.42%

FTSE 100 - Risers
GKN (GKN) 348.50p +3.17%
Compass Group (CPG) 1,109.00p +2.59%
ARM Holdings (ARM) 998.00p +1.99%
Unilever (ULVR) 2,678.00p +1.98%
AstraZeneca (AZN) 4,672.50p +1.86%
Randgold Resources Ltd. (RRS) 5,020.00p +1.80%
Mondi (MNDI) 1,067.00p +1.72%
WPP (WPP) 1,380.00p +1.62%
Reckitt Benckiser Group (RB.) 5,330.00p +1.62%
Carnival (CCL) 3,063.00p +1.56%

FTSE 100 - Fallers
SSE (SSE) 1,503.00p -5.77%
BG Group (BG.) 800.00p -3.63%
Antofagasta (ANTO) 727.50p -3.00%
Centrica (CNA) 261.00p -2.90%
Intertek Group (ITRK) 2,393.00p -2.68%
Standard Chartered (STAN) 921.20p -2.53%
Weir Group (WEIR) 1,723.00p -2.49%
Glencore (GLEN) 279.45p -2.36%
Rio Tinto (RIO) 2,924.50p -2.03%
Ashtead Group (AHT) 1,117.00p -1.93%

FTSE 250 - Risers
AO World (AO.) 262.50p +6.23%
Laird (LRD) 317.40p +5.24%
Acacia Mining (ACA) 294.00p +4.81%
Hikma Pharmaceuticals (HIK) 2,380.00p +4.25%
Betfair Group (BET) 1,538.00p +4.08%
Dairy Crest Group (DCG) 468.20p +3.26%
Synthomer (SYNT) 237.00p +3.00%
Pace (PIC) 342.10p +2.95%
Domino's Pizza Group (DOM) 703.50p +2.70%
NMC Health (NMC) 500.00p +2.63%

FTSE 250 - Fallers
Afren (AFR) 27.31p -30.53%
Hunting (HTG) 441.00p -8.05%
Ophir Energy (OPHR) 130.00p -7.14%
Premier Oil (PMO) 135.40p -6.69%
Drax Group (DRX) 356.00p -5.94%
Soco International (SIA) 255.00p -5.13%
Wood Group (John) (WG.) 539.00p -4.94%
Redrow (RDW) 265.10p -4.33%
Petrofac Ltd. (PFC) 608.00p -4.33%
Cairn Energy (CNE) 160.60p -4.29%