London midday: Stocks rise on ECB stimulus bets, oil prices continue to fall

Concerns about the ongoing decline in the price of oil were outweighed by increased hopes of further stimulus in Europe on Monday, with UK stocks bouncing back after suffering their worst start to a year since 2008.

The FTSE 100 was trading 0.4% higher at 6,526 by midday.

The index settled at 6,501.14 by Friday’s close, taking its year-to-date fall to 1%, following a mixed reaction to the latest US jobs report. This was the weakest first week of the year since the global financial crisis hit seven years ago.

Oil prices were in focus on Monday with Brent crude down 2.6% at $48.81 a barrel, extending losses after last week reaching its lowest level in over five and a half years.

Goldman Sachs cut its forecast for Brent in three months’ time to just $42 a barrel, and said that prices will “need to stay lower for longer”.

However, heightened fears about deflation - mainly attributable to the collapse in oil prices - have added to speculation that the European Central Bank (ECB) will introduce full-blown quantitative easing (QE) when it meets next week.

“The ECB rumour mill is boosting global risk-assets and pressuring the euro over possible plans for QE in the Eurozone,” said analyst Jasper Lawler from CMC Markets.

Monday’s calendar was relatively quiet in terms of economic data, though things will pick up later in the week. Chinese trade figures are due out overnight, while inflation data from the UK, Eurozone and US will be released over the coming days.

Investors will also be looking ahead to the unofficial start of US fourth-quarter earnings season on Monday night, 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.

Shire buys NPS, Afren plummets

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.

Oil and gas group Afren was a big mover, dropping 21% after reporting that 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, with Weir Group, BG Group, BHP Billiton, Hunting and Wood Group trading firmly in the red. In contrast, the lower oil price was helping stocks in the travel sector higher, including Carnival and TUI.

Engineer GKN was given a boost by Credit Suisse which lifted its target price on the stock and reiterated an ‘outperform’ rating.

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.

Shares in troubled insurance outsourcer Quindell soared nearly 30% after the company replaced its chairman.

Market Movers
techMARK 2,996.30 +0.46%
FTSE 100 6,525.58 +0.38%
FTSE 250 16,004.92 -0.04%

FTSE 100 - Risers
GKN (GKN) 347.50p +2.87%
Mondi (MNDI) 1,079.00p +2.86%
Carnival (CCL) 3,093.00p +2.55%
ARM Holdings (ARM) 1,000.00p +2.20%
WPP (WPP) 1,386.00p +2.06%
Unilever (ULVR) 2,679.00p +2.02%
G4S (GFS) 277.20p +1.95%
Admiral Group (ADM) 1,379.00p +1.92%
Associated British Foods (ABF) 3,136.00p +1.88%
Compass Group (CPG) 1,100.00p +1.76%

FTSE 100 - Fallers
Weir Group (WEIR) 1,718.00p -2.77%
SSE (SSE) 1,554.00p -2.57%
Standard Chartered (STAN) 922.50p -2.39%
Centrica (CNA) 262.80p -2.23%
Rio Tinto (RIO) 2,935.00p -1.68%
Antofagasta (ANTO) 739.50p -1.40%
BG Group (BG.) 818.90p -1.35%
Intertek Group (ITRK) 2,429.00p -1.22%
Sainsbury (J) (SBRY) 239.40p -0.99%
BHP Billiton (BLT) 1,362.50p -0.98%

FTSE 250 - Risers
AO World (AO.) 265.40p +7.41%
Pace (PIC) 347.00p +4.42%
Hikma Pharmaceuticals (HIK) 2,364.00p +3.55%
Laird (LRD) 310.80p +3.05%
Dairy Crest Group (DCG) 466.00p +2.78%
Enterprise Inns (ETI) 110.70p +2.50%
Synthomer (SYNT) 235.60p +2.39%
Elementis (ELM) 275.60p +2.04%
NMC Health (NMC) 496.60p +1.93%
Betfair Group (BET) 1,506.00p +1.91%

FTSE 250 - Fallers
Afren (AFR) 31.10p -20.89%
Hunting (HTG) 438.90p -8.49%
Wood Group (John) (WG.) 539.00p -4.94%
Drax Group (DRX) 360.70p -4.70%
Crest Nicholson Holdings (CRST) 353.50p -4.17%
Soco International (SIA) 258.20p -3.94%
Premier Oil (PMO) 139.60p -3.79%
Serco Group (SRP) 154.30p -3.44%
Petrofac Ltd. (PFC) 614.50p -3.30%
Redrow (RDW) 268.10p -3.25%