London close: Stocks fall after mixed services data

The FTSE 100 closed lower on Wednesday as investors weighed mixed services data and a report showing US crude oil inventories rose more than expected last week.

Markit’s purchasing managers’ index on UK services climbed to 55.6 in January from 55.5 in December, beating forecasts of 55.4. A reading above 50 signals an expansion in sector activity while a level below that suggests a contraction.

However, Markit's chief economist Chris Williamson warned that order book backlogs were “already falling at the fastest rate for almost three years and companies have scaled back their hiring in response to growing uncertainty about the economic outlook at home and abroad”.

Elsewhere, the Caixin PMI reading of China's services rose to 52.4 in January from 50.2 the previous month.

Markit’s final reading on Eurozone services PMI was unchanged from a previous estimate at 53.6 in January, as expected, but down from December’s 54.2.

In other Eurozone data, retail sales increased 0.3% in December from the previous month, according to Eurostat. The figure was in line with economists’ expectations and marked the first increase in fourth months. On the year, sales rose 1.4%, in line with 2014 but just a touch below estimates for a 1.5% gain.

In the US, Markit’s final reading of the services PMI was revised to 53.2 in January from a previous estimate of 53.7, down from 54.3 in December.

ISM’s US non-manufacturing composite also fell short of estimates. The index dropped to 53.5 in January from 55.8 in December, compared to forecasts of 55.2.

Meanwhile, private payrolls figures from ADP showed US employers added 205,000 jobs in January, beating forecasts of 195,000 and following 267,000 in December. The report comes ahead of the non-farm payrolls on Friday, which the Federal Reserve will be closely monitoring as it decides when to next raise interest rates.

“While we place limited weight on the ADP jobs numbers, this morning’s release is supportive of our outlook for 225,000 in non-farm payroll gains in Friday’s official employment report,” said Barclays Research analysts.

Less positive, US crude oil inventories rose more than expected in the week ended 29 January, official data revealed on Wednesday, adding to concerns about the global supply glut. The Energy Information Administration (EIA) said commercial crude oil inventories increased 7.8m barrels to 502.7m barrels last week, compared to analysts’ estimates for a rise of 4.0m barrels.

Oil prices rose as Russian Foreign Minister Sergei Lavrov on Wednesday said if the Organization of the Petroleum Exporting Countries (OPEC) and non-OPEC members agree to meet to discuss ways to address the supply glut "then we will meet".

Brent crude was up 4.8% to $34.38 per barrel and West Texas Intermediate was up 4.8% to $34.38 per barrel at 1635 GMT.

On the company front, Standard Chartered plunged after Citi lowered its target price on the shares of Asia-focused and commodity-exposed lender. The broker described the lender’s valuation at 0.5 times estimated 2016 price-to-tangible book value as "low" in the context of global banks.

Vodafone fell a day after the telco confirmed that it is in discussions with Liberty Global about the possible creation of a joint venture in the Netherlands that would incorporate both companies’ local operating businesses.

Banks were under pressure including Royal Bank of Scotland, Barclays and HSBC as UBS warned that another year of fundamental headwinds such as oil and central bank policy will likely weigh on earnings expectations for global banks in 2016.

Insurance giant Prudential rebounded from the previous day's declines after Barclays reiterated an ‘overweight’ rating for the stock, saying that it believes concerns over China’s new tighter regulations on buying insurance overseas were “misplaced”. “We believe that this change, even if extended to all transactions above $5,000, is unlikely to materially impact Hong Kong sales,” Barclays said.

GlaxoSmithKline jumped after the pharmaceutical company posted full year results showing revenues increasing 6% and core earnings per share down 15%, slightly ahead of guidance, and reiterated its confidence that earnings growth would return in 2016 at double-digit levels.

Market Movers

FTSE 100 (UKX) 5,838.71 -1.41%
FTSE 250 (MCX) 15,985.33 -1.93%
techMARK (TASX) 3,085.99 -1.82%

FTSE 100 - Risers

Anglo American (AAL) 275.80p 9.38%
Rio Tinto (RIO) 1,685.00p 4.17%
Glencore (GLEN) 86.30p 3.79%
Antofagasta (ANTO) 375.60p 2.76%
Prudential (PRU) 1,238.50p 1.72%
BHP Billiton (BLT) 643.20p 1.71%
Hikma Pharmaceuticals (HIK) 2,128.00p 1.58%
Randgold Resources Ltd. (RRS) 5,105.00p 0.89%
ARM Holdings (ARM) 986.50p 0.56%
Royal Dutch Shell 'A' (RDSA) 1,441.50p 0.56%

FTSE 100 - Fallers

Aberdeen Asset Management (ADN) 224.00p -4.68%
Barclays (BARC) 165.85p -4.55%
Shire Plc (SHP) 3,723.00p -4.17%
Standard Chartered (STAN) 414.80p -4.14%
Vodafone Group (VOD) 212.90p -3.90%
HSBC Holdings (HSBA) 449.45p -3.88%
Rolls-Royce Holdings (RR.) 513.00p -3.48%
International Consolidated Airlines Group SA (CDI) (IAG) 523.50p -3.23%
Royal Bank of Scotland Group (RBS) 232.90p -3.20%
Old Mutual (OML) 152.50p -3.17%

FTSE 250 - Risers

Northgate (NTG) 331.00p 2.48%
DFS Furniture (DFS) 322.00p 2.22%
Ibstock (IBST) 214.00p 1.90%
Evraz (EVR) 57.20p 1.87%
Greencore Group (GNC) 385.00p 1.77%
Tullow Oil (TLW) 161.20p 1.77%
Crest Nicholson Holdings (CRST) 589.00p 1.46%
B&M European Value Retail S.A. (DI) (BME) 288.70p 1.01%
Shaftesbury (SHB) 852.50p 1.01%
Daejan Holdings (DJAN) 6,075.00p 0.83%

FTSE 250 - Fallers

Circassia Pharmaceuticals (CIR) 272.00p -7.36%
Allied Minds (ALM) 301.50p -7.23%
Scottish Mortgage Inv Trust (SMT) 231.00p -7.00%
Keller Group (KLR) 752.50p -6.70%
Brewin Dolphin Holdings (BRW) 264.60p -6.20%
Pendragon (PDG) 36.90p -6.13%
Homeserve (HSV) 379.00p -5.72%
Serco Group (SRP) 77.10p -5.69%
Interserve (IRV) 441.90p -5.54%
Just Eat (JE.) 344.20p -5.44%