London close: Stocks finish lower as oil prices sink

London markets ended Tuesday in negative territory, driven primarily by a sharp decline in energy stocks following a drop in oil prices.

The FTSE 100 index shed 0.52% to close at 8,249.28 points, while the FTSE 250 fell 0.11%, finishing at 20,794.44 points.

In currency markets, sterling was last up 0.19% on the dollar, trading at $1.3084, as it advanced 0.26% against the euro, changing hands at €1.2003.

“The oil price slumped by 5% on reports that Israel isn't planning on attacking Iran's oil infrastructure,” said IG senior analyst Axel Rudolph.

“Monday's OPEC+ and now IEA demand growth forecasts cuts amid alleviated fears of a major supply disruption in the Middle East weigh on the price of oil.

“So far a 7% drop has taken the oil price to a two-week low to below the $70 per barrel mark.”

Rudolph added that following last week's record highs in US stock indices and this week's German DAX 40 new all-time high, some investors were now taking money off the table ahead of option expiries later in the week.

“Tuesday's dip occurred despite improving German investor morale and eurozone industrial output rebounding the most since February 2023 as well as UK wage growth slowing for a fourth month.”

UK earnings growth slows, eurozone industrial output rebounds

In economic news, UK earnings growth slowed to its weakest level in over two years, reinforcing signs of a softening jobs market as businesses reduced payrolls.

Data from the Office for National Statistics showed that average regular earnings growth eased to 4.9% in the three months to August, down from 5.1% in the prior quarter - the lowest since June 2022.

Meanwhile, job vacancies fell by 34,000 to 841,000 in the quarter to September, and the number of workers on UK payrolls dropped by 35,000 between July and August.

Despite the trends, the unemployment rate unexpectedly dipped to 4%, though the ONS cautioned that the figure could be skewed by a low response rate to its jobs survey.

The weaker labour market has heightened expectations of a potential rate cut from the Bank of England next month.

“The further fall in wage growth in August, together with some signs that the labour market continued to loosen gradually, adds further support to widespread expectations that the Bank of England will cut interest rates from 5.00% to 4.75% at the next policy meeting in November,” said Ashley Webb, UK economist at Capital Economics.

On the continent, eurozone industrial production bounced back in August, rising by 1.8% month-on-month, reversing a 0.5% decline in July.

Data from Eurostat revealed a broader 1.3% increase across the European Union, with annual growth in industrial output at 0.1% in the euro area and 0.2% across the EU.

Germany led the recovery with a 3.3% surge in output, while Ireland posted the highest monthly gain at 4.5%.

In contrast, Luxembourg experienced a sharp 9.2% decline.

Capital goods production in the eurozone grew by 3.7%, driving much of the overall recovery, although intermediate goods production slipped by 0.3%.

Analysts from ING welcomed the strong August data, noting that it offers some short-term support for third-quarter economic growth after a series of downbeat survey results.

“A strong 1.8% month-on-month increase in production provides some support for third-quarter growth expectations,” ING said.

Meanwhile, economic sentiment in Germany showed a marked improvement in October.

The ZEW Indicator of Economic Sentiment rose to 13.1, up from 3.6 in September and ahead of forecasts, reflecting optimism about future economic conditions.

However, the current situation index dropped further, hitting -86.9, the lowest since May 2020, suggesting lingering concerns about the near-term outlook.

Across the Atlantic the Empire State manufacturing index from the New York Federal Reserve plunged to -11.9 in October, a sharp reversal from September’s positive reading of 11.5.

The unexpectedly poor result was driven by a steep decline in new orders and shipments, with both metrics pointing to contraction in the manufacturing sector.

Energy and mining stocks sink, travel plays rise on oil prices

On London’s equity markets, energy and mining stocks were among the decliners due to plunging commodity prices.

Oil majors BP and Shell dropped 4.06% and 3.67% respectively, as Brent crude futures tumbled over 4%, hovering below $74 per barrel.

Other energy-linked companies, including Harbour Energy, John Wood Group, and Weir Group, also saw losses.

In the mining sector, heavyweights Glencore and Anglo American each shed 3.45%, while Antofagasta and Rio Tinto posted declines amid falling copper prices driven by a strong dollar and concerns about the Chinese economy.

Elsewhere, Bytes Technology Group fell 3.91% following a 2.9% drop in revenue, despite a strong rise in invoiced income.

Workspace Group lost 2.26% as a slight dip in occupancy offset positive pricing momentum.

Mitie Group was 2.81% lower despite strong revenue growth, and Paragon Banking Group dropped 3.96% after a broker downgrade by Jefferies.

On the upside, airlines benefited from the oil price slump, with IAG up 4.11%, easyJet climbing 3.15%, and Wizz Air advancing 3.07%.

Cruise operator Carnival also rose 5.42%.

Housebuilders were in the green, led by Bellway, which surged 8.26% despite reporting a sharp drop in annual profits.

Barratt Redrow, Persimmon, and Taylor Wimpey followed suit with gains.

In banking, NatWest and Lloyds made modest advances, with Jefferies upgrading NatWest to 'buy'.

Meanwhile, fintech platform Wise jumped 5.16% after reporting strong growth in revenue and customer numbers.

DiscoverIE Group also rose 7%, supported by better-than-expected first-half earnings.

Outside the FTSE 350, De La Rue soared 20.04% after announcing the sale of its authentication division, while newspaper publisher Reach saw a 1.6% gain, remaining on track to meet market expectations.

Reporting by Josh White for Sharecast.com.

Market Movers

FTSE 100 (UKX) 8,249.28 -0.52%
FTSE 250 (MCX) 20,794.44 -0.11%
techMARK (TASX) 4,757.44 -0.46%

FTSE 100 - Risers

International Consolidated Airlines Group SA (CDI) (IAG) 206.90p 4.10%
Persimmon (PSN) 1,662.00p 3.81%
easyJet (EZJ) 518.00p 3.15%
Barratt Redrow (BTRW) 472.00p 2.79%
JD Sports Fashion (JD.) 132.90p 2.35%
Taylor Wimpey (TW.) 160.15p 2.17%
United Utilities Group (UU.) 1,072.00p 2.00%
Hikma Pharmaceuticals (HIK) 1,961.00p 1.92%
Relx plc (REL) 3,672.00p 1.89%
Convatec Group (CTEC) 231.00p 1.85%

FTSE 100 - Fallers

Antofagasta (ANTO) 1,796.50p -4.52%
Glencore (GLEN) 403.55p -4.04%
BP (BP.) 392.50p -3.89%
Spirax Group (SPX) 6,665.00p -3.75%
Croda International (CRDA) 3,816.00p -3.47%
Entain (ENT) 681.00p -3.46%
Anglo American (AAL) 2,224.00p -3.45%
Shell (SHEL) 2,502.50p -3.36%
Mondi (MNDI) 1,402.00p -3.11%
Prudential (PRU) 661.80p -3.05%

FTSE 250 - Risers

Bellway (BWY) 3,306.00p 8.32%
Discoverie Group (DSCV) 642.00p 7.00%
Carnival (CCL) 1,477.00p 5.42%
Tate & Lyle (TATE) 745.00p 5.23%
IntegraFin Holding (IHP) 378.00p 4.85%
CMC Markets (CMCX) 319.50p 4.24%
Close Brothers Group (CBG) 379.60p 3.77%
JTC (JTC) 1,084.00p 3.24%
PPHE Hotel Group Ltd (PPH) 1,170.00p 2.18%
St James's Place (STJ) 795.50p 2.12%

FTSE 250 - Fallers

Syncona Limited NPV (SYNC) 103.40p -5.71%
Fidelity China Special Situations (FCSS) 211.50p -5.61%
Watches of Switzerland Group (WOSG) 443.40p -4.85%
Renishaw (RSW) 3,400.00p -4.76%
Paragon Banking Group (PAG) 740.00p -3.96%
Bytes Technology Group (BYIT) 473.80p -3.93%
Ocado Group (OCDO) 369.60p -3.88%
Victrex plc (VCT) 874.00p -3.21%
Asia Dragon Trust (DGN) 417.00p -3.02%
Mitie Group (MTO) 117.80p -2.81%