London midday: Stocks drift lower despite oil price rally
Stocks in London drifted a little lower in fairly quiet trade, but losses were capped by strength in the energy sector after non-OPEC and OPEC members reached a deal on Saturday to cut production for the first time since 2001, lifting oil prices.
At midday, the FTSE 100 was down 0.3% to 6,933.76. Meanwhile, West Texas Intermediate was up 3.8% to $53.56 a barrel and Brent crude was 3.7% higher at $56.44.
Non-OPEC countries agreed to cut production by 558,000 barrels per day, with the majority of the cuts pledged by Russia. This is in addition to OPEC’s recent agreement to slash output by 1.2m barrels a day. Comments from Saudi Arabia’s energy minister Khalid al Falih also helped to underpin oil prices, as he said the country will “cut substantially to be below” the target agreed in November with OPEC members.
BP shares rose 2%, while Royal Dutch Shell was 3.4% higher and Tullow Oil rallied more than 7%.
IG’s Chris Beauchamp said: “The weekend deal by non-OPEC nations, plus comments from the Saudi oil minister about further production cuts, have produced a surge in oil prices, lifting the likes of BP and Shell on the FTSE 100 this morning. The index itself is coming under pressure from banks and other financial stocks, and without the bounce in major oil firms we would be even further in the red.
“With an-almost empty corporate and economic calendar today, investors are already looking towards Wednesday’s Fed meeting as the key event of the week.”
In corporate news, Glencore edged up after saying that it and the Qatar Investment Authority have concluded various agreements providing for the establishment of a 50:50 consortium, to take a chunk of Russian state gas operation Rosneft.
Marks & Spencer was in the black as Bank of America Merrill Lynch upgraded the stock to ‘buy’ from ‘neutral’.
DFS Furniture ticked lower after it said chairman Richard Baker will step down in spring next year after more than six years in the role.
Engineering firm WS Atkins was also a touch weaker as it agreed to sell its minority investment in the M25 motorway to a consortium of institutional investors for £66.3m.
Sky nudged down after surging on Friday following a $14bn takeover bid from 21st Century Fox.
ASOS was on the back foot as the online retailer said it will hire an additional 1,500 people at its London headquarters over the next three years.
Polymetal International lost its shine after RBC Capital Markets downgraded the stock to ‘sector perform’ from ‘outperform’ and slashed the price target to 810p from 1,460p.
Investors were also digesting a report by property website Rightmove, which said that asking prices for UK properties are likely to rise by 2% in 2017, which is down from the 3.4% estimated growth this year.
In inner London, however, asking prices are expected to fall by 5% next year “as its price bubble continues to deflate”.
Rightmove said house prices fell 2.1% month-on-month in December, giving an average price of £299,159.
Looking ahead to the rest of the week, the focus will turn to the Federal Reserve rate announcement on Wednesday, as markets have largely priced in a 25 basis points hike.
“There should be no surprises around this meeting, though the press conference will take on an even greater significance in the context of the signalling of Fed intentions in 2017, as regards further rate rises,” said CMC Markets' Michael Hewson.
Market Movers
FTSE 100 (UKX) 6,933.76 -0.29%
FTSE 250 (MCX) 17,743.69 0.06%
techMARK (TASX) 3,268.85 -0.03%
FTSE 100 - Risers
BHP Billiton (BLT) 1,408.50p 3.95%
Royal Dutch Shell 'B' (RDSB) 2,257.00p 3.34%
Royal Dutch Shell 'A' (RDSA) 2,144.50p 2.73%
BP (BP.) 486.15p 2.09%
Anglo American (AAL) 1,236.00p 1.81%
Antofagasta (ANTO) 768.00p 1.52%
Marks & Spencer Group (MKS) 342.30p 1.09%
Paddy Power Betfair (PPB) 8,355.00p 0.91%
InterContinental Hotels Group (IHG) 3,380.00p 0.90%
Rio Tinto (RIO) 3,238.50p 0.47%
FTSE 100 - Fallers
Polymetal International (POLY) 742.50p -5.17%
ITV (ITV) 185.80p -2.98%
Capita (CPI) 466.00p -2.92%
Fresnillo (FRES) 1,151.00p -2.79%
Randgold Resources Ltd. (RRS) 5,725.00p -2.39%
Croda International (CRDA) 3,116.00p -2.38%
HSBC Holdings (HSBA) 658.30p -2.30%
British Land Company (BLND) 608.50p -2.17%
Land Securities Group (LAND) 992.50p -2.12%
AstraZeneca (AZN) 4,189.50p -2.11%
FTSE 250 - Risers
Evraz (EVR) 266.80p 13.73%
International Personal Finance (IPF) 174.40p 8.59%
Mitie Group (MTO) 229.20p 7.81%
Tullow Oil (TLW) 335.00p 7.27%
Petrofac Ltd. (PFC) 905.00p 4.02%
Hochschild Mining (HOC) 240.20p 3.98%
Cairn Energy (CNE) 226.20p 3.62%
Vedanta Resources (VED) 960.50p 3.39%
Allied Minds (ALM) 408.00p 3.26%
Entertainment One Limited (ETO) 229.40p 3.19%
FTSE 250 - Fallers
Ladbrokes Coral Group (LCL) 120.50p -7.73%
BGEO Group (BGEO) 3,281.00p -2.90%
Centamin (DI) (CEY) 128.00p -2.74%
Marshalls (MSLH) 289.50p -2.49%
Ocado Group (OCDO) 246.60p -2.18%
Galliford Try (GFRD) 1,266.00p -2.16%
IG Group Holdings (IGG) 447.80p -2.03%
SEGRO (SGRO) 436.80p -1.95%
Restaurant Group (RTN) 332.80p -1.94%
Derwent London (DLN) 2,643.00p -1.93%